Intended cash offer by Gruppo Dragados for HBG

5 February 2002 11:55 - Royal BAM Group nv

GRUPO DRAGADOS, S.A. (“Grupo Dragados”) and HOLLANDSCHE BETON GROEP nv (“HBG”) jointly announce that the expectation is justified that agreement can be reached between Grupo Dragados and HBG about a cash offer to be launched by Grupo Dragados for all the ordinary shares of HBG and the subsequent integration of the activities of both companies.

Not for release, publication or distribution, in whole or in part, in or into Germany, the UK, the US, Canada, Australia or Japan. This announcement and related materials do not constitute an offer for HBG shares but an offer is expected to be made in due course as set out in this press release.

  • The transaction values HBG at approximately €756 million, based on a price of €21.25 per ordinary HBG share (including 2001 dividends), to be paid in cash.
  • The combined entity will retain the name Grupo Dragados and will be led by a Management Board with four members from each company and will be chaired by Mr. Santiago Foncillas, current Chairman of the Board of Directors of Grupo Dragados.
  • The proposed transaction will be an important step for the common goal of creating a European services and construction group with international capabilities and an increasing focus on higher value added services.
  • Grupo Dragados will become the 3rd largest construction and services player in Europe and will enter the attractive dredging market in a leading position through HBG's two-thirds stake in BHD.
  • Grupo Dragados will solidify its position as world leader in the growing concessions (PFI) market, will leverage HBG's strong local network to replicate its diversification into services and will increase its geographic scope to sell industrial projects.
  • The transaction will be earnings enhancing [pre-goodwill] for Grupo Dragados by more than 15% in the current year ending December 2002.

Madrid/ Rijswijk, 5 February 2002

Grupo Dragados, Spain's leading construction and services group and HBG, the Dutch construction and dredging group listed on Euronext Amsterdam, jointly announce Grupo Dragados’ intention to launch a cash offer for all the shares of HBG and thereafter proceed to the integration of the activities of both companies, in order to create a leading European construction and services group.

Grupo Dragados intends to launch a public offer of € 21.25 in cash per share (including 2001 dividends) for all issued and outstanding ordinary shares of HBG (the "Offer").

After considering the strategic, financial and social aspects of the Offer, the Supervisory and Management Boards of HBG believe that the combination of HBG with Grupo Dragados is in the best interest of the shareholders and all other stakeholders in HBG. They also believe that the Offer is a fair reflection of the value of the company and therefore intend to recommend shareholders to accept the contemplated Offer.

Following completion of the transaction it is intended that the combined group will retain the name Grupo Dragados. The new group will preserve the principles and values of both companies with respect to business strategy, employees, customers and suppliers. The resulting organisation will be run by a new Management Board comprised equally of representatives of Grupo Dragados and HBG and will be chaired by Mr. Santiago Foncillas, current Chairman of the Board of Directors of Grupo Dragados.

The Offer

The Offer values 100% of the ordinary shares of HBG at approximately € 756 million and represents:

  • a premium of 60% to the average closing HBG share price for the last 30 trading days
  • a premium of 57% to the closing share price on 4th of February 2002

Grupo Dragados will fund acceptances under the Offer using an initial bridge loan facility and intends to acquire 100% of the issued and outstanding share capital of HBG. Following completion of the Offer, Grupo Dragados intends to seek a listing on Euronext Amsterdam.

The Offer Memorandum containing the terms and conditions is expected to be published in March 2002. HBG shareholders will also be invited to attend an informatory extraordinary general meeting in relation to the Offer prior to the closing of the acceptance period. Details of this meeting will be made available to shareholders in due course.

The trade unions, Central Works Council of HBG and appropriate authorities have been duly informed of the proposed Offer.

Strategic Rationale

In the last decade Grupo Dragados has successfully used its construction division as a platform to diversify into value added activities such as concessions and services, principally in Spain and Latin America. HBG's recently stated strategic goals are expansion of activities with higher added value, utilisation of the group’s know-how and scale and development of the leading market position in dredging.

The combination of the activities of Grupo Dragados and HBG is a further step in achieving those stated strategic goals for both companies. The enlarged Grupo Dragados will further diversify its activities by entering into the attractive high margin dredging industry. HBG's construction activities in the UK, Ireland, the US, Germany and the Benelux form an excellent platform to develop value added activities in those markets in concessions, services and industrial using Grupo Dragados’ experience and capabilities. The combined group will be a pan European services and construction group and will be less dependent on single geographic markets or businesses, thus providing more stable earnings.

The combined group will be a global leader in transport concessions, the largest dredger in terms of capacity and Europe's third largest construction and services player. The transaction will be earnings enhancing [pre-goodwill] for Grupo Dragados’ shareholders by more than 15% in the current year ending 2002.

The group's activities will be organised in five business areas

  • Dredging
  • Concessions
  • Services and Industrial
  • Civil Engineering
  • Building Construction and Real Estate

Dredging

The total expenditure in the global dredging market is estimated to be US$5 billion per year. This market can be characterised by its global nature, high entry barriers, current capacity constraints and high profit generation. The market is dominated by five players of which BHD, the dredging company in which HBG owns two-thirds of the share capital, is the largest in terms of its fleet size. The growth of the current market is expected to be seven to eight per cent per annum which will be further supported by markets that have been closed to date but are expected to open up for competition in the near future.

The inclusion of this activity in the business portfolio is a further step in the diversification of Grupo Dragados. Within the merged group, BHD will receive full support to further develop its leading position in the consolidating dredging market. Grupo Dragados' network in Iberia and Latin America will also strengthen BHD's business in those markets.

Concessions

The annual volume of new concessions or PFI projects (Private Finance Initiatives) in HBG's current European domestic markets (the UK, Ireland, Germany and the Benelux) is estimated to be €14 billion in 2004. The new group will be ideally placed to benefit from this significant potential by combining Grupo Dragados’ experience and financial capabilities with HBG's existing construction platforms. Grupo Dragados and HBG believe that Germany will be an important growth market based on future funding requirements and the changing legal framework with respect to concessions or PFI. In the UK the group will be able to develop its existing market position in toll roads (Grupo Dragados) and benefit from its experience in non-residential PFI projects (HBG). In Ireland, Grupo Dragados and HBG are already jointly tendering for different toll road projects and will be able to build on HBG's leading position in the construction market.

Services and Industrial

The total expenditure on urban waste collection and treatment in HBG’s European markets is estimated to be €7-8 billion annually and expected to grow at four to five percent per annum. Given the high proportion of landfill waste in the UK and Ireland these markets are expected to show strong growth in the coming years and will face heavy investment through increased use of recycling. In those markets the group will be able to benefit from this market potential by combining Grupo Dragados’ expertise and technology with HBG's network of local contacts. In the German waste treatment market, still largely publicly controlled, opportunities exist to tender for projects in the medium term.

The integration of Grupo Dragados’ Industrial division with HBG's Tebodin will create a strong engineering and consulting business with presence in Western and Eastern Europe, Latin America, the Middle East and South-East Asia. The specialisation of both companies  is complementary (Grupo Dragados in power, fertilisers and petrochemicals, HBG in chemicals and food). In addition, HBG's construction activities can be used as a platform to sell Grupo Dragados’ industrial projects in its domestic markets.

Civil Engineering

The new group will have a domestic presence in Spain, the Benelux, the UK, Ireland, Germany, Latin America and the US. In those markets the group will be a leading player with superior technical capabilities and a broad portfolio of complex projects. In the international markets, the civil engineering division will be able to work on awarded concessions and could use Tebodin's existing network in Central and Eastern Europe.

Building Construction and Real Estate

This division will be active in Spain, the Benelux, Germany, Portugal, the UK,  Ireland and Latin America and will focus on higher value added non-residential projects and working for awarded concessions (PFI). Property development opportunities will be considered in selected markets.

Organisation

The company's head office will be based in Madrid with divisional headquarters in existing locations in the Netherlands and Spain . The Management Board will consist of eight members:

Santiago Foncillas (Dragados)

President (with casting vote)

Chairman of the Board of Directors

Demetrio Ullastres (Dragados)

Vice President

Overall direction of the Company, Concessions, Constructionin Spain, Strategic Planning, Business Development and HR

Carel Jan Reigersman (HBG)

Vice President

Overall direction of the Company, Dredging, International Contracts and cross selling activities, Strategic Planning, Business Development and HR

Antonio García Ferrer (Dragados)

Chief Operating Officer 

Services and Industrial

Adrian Franklin (HBG)

Chief Operating Officer

Civil Engineering

Guus Hoefsloot (HBG)

Chief Operating Officer

Building Construction and Real Estate

Fernando Gutiérrez de Vera (Dragados)

Chief Financial Officer

Financial policy and financing structure

Tjalling Tiemstra (HBG)

Chief Administrative Officer

General administrative control and IT

 

The activities of both companies are largely complementary. Therefore, the integration is not expected to have any negative impact on overall employment. New Grupo Dragados will employ more than 70,000 people worldwide.

Key Figures

In 2001 the combined group would have estimated revenues of €10.8 billion,  EBIT before exceptional items of €515 million and net income of €351 million.

Advisers

Rothschild is advising Grupo Dragados and Lazard is advising HBG.

Press enquiries

Grupo Dragados:

HBG:

  • Arno Pronk, Manager Public Relations, +31 70 372 2121. apronk@hbg.nl