Spain's building sector consolidates

Spanish construction company Fomento de Construcciones y Contratas SA and cement maker Portland Valderrivas SA said they plan to merge, continuing the recent M&A barrage in the countryÂ's building sector.

FCC, which already owns 48.22% of Portland Valderrivas, will swap six of its shares for every five Portland shares, which amounts to an 11.7% premium over Monday, April 15Â's closing share price 0f €29 ($25.59), the companies said in a statement issued late April 15 to securities regulators. The deal values each Portland share at €32.3 and values the 51.78% of Portland to be bought at €364.6 million ($320.7 million).

Portland Valdrerrivas has a 58.84% stake in Cementos Portland , one of SpainÂ's biggest cement companies. After the merger, the companyÂ's structure will be simplified by eliminating holding company Portland Valderrivas, the companies said in their regulatory filing.

Analysts attribute the transaction binge to the European UnionÂ's plan to cut off funding for construction in Spain in 2007. Last week, Grupo Dragados SA said shareholders owning 98.9% of Dutch dredging and construction company Hollandsche Beton Groep NV had accepted its takeover offer, worth €756 million. The acquisition will make Grupo Dragados the third-largest construction company in Europe. Meanwhile, Spanish construction and highway concession companies Aurea Concesiones de Infraestructuras SA and Autopistas Concesionaria Española SA, or Acesa, are battling for smaller domestic rival Iberica de Autopistas SA.

Currently, Aurea has the top bid, €925 million, although Spanish regulators have yet to approve it. Regulators have already approved AcesaÂ's €712 million bid for the 91.93% of Iberpistas it doesnÂ't already own.

FCC, SpainÂ's largest construction company, estimates that earnings per share will increase about 5% this year due to the merger and as much as 7% in 2003. Last year, FCC reported €5.1 billion in sales and a net income of €241 million.

Portland Valderrivas in 2001 had a net profit of €100 million ($88 million) on sales of €807 million. The companies expect to complete the merger by August. FCC is 57.06% owned by a holding company called B-1998 SL, of which Spanish entrepreneur Esther Koplowitz owns 51%. Vivendi Environnement of France holds the remainder. After the merger, B-1998 will control no less than 52% of the combined entity, FCC said.


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