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Kenneth Ko

PAUL Y-ITC Construction Holdings (Paul Y) is merging with Asia-Pacific construction concern Downer Group in a deal worth $245 million.

   Paul Y will issue 98 million new shares at $2.50 each in consideration for the construction activities of Downer to Brierley Investments Ltd (BIL), New Zealand's largest investment holding company.

   The issue price represents a 29.53 per cent premium to yesterday's closing price of $1.93, and the 98 million shares constitute 12.88 per cent of Paul Y's existing share capital.

   BIL will subscribe a further 52 million new Paul Y shares for cash at the same price, bringing its stake in Paul Y to 16.47 per cent following the merger with Downer.

   Directors of Paul Y and BIL said the merger fitted well into the strategy of expansion for Paul Y and Downer in terms of market base, construction capacity and technical capability.

   The combined company will have contracts on hand worth more than $10 billion and a workforce of 3,370 employees.

   Paul Y and BIL believe the respective strengths of Paul Y and Downer will complement each other, and that they will both benefit from further expansion into the international market.

   With substantial investments in a wide spectrum of industries and markets, BIL is expected to assist the merger in identifying business development opportunities.

   BIL executive director Andrew Meehan, who will join Paul Y's board, said his company considered its shareholding in Paul Y a long-term investment.

   The issue of new shares for the merger and the subscription by BIL would strengthen the financial base of the merger, he said.

   Downer has more than 63 years of experience in civil engineering and other building work, including airports, highways, railways, power stations, tunnels, ports and bridges.

   Its profit before extraordinary items for the year to June 30, 1993, was $30 million, compared with $78 million for the preceding year.

   As at May 31, Downer had 65 contracts on hand with a total value of $2.2 billion.

   Last week, it won a $125 million contract to provide utilities, roads and bridges for Hong Kong's airport contract, plus a $120 million contract for a Papua New Guinea tuna cannery.

   Other major shareholders in Paul Y are International Tak Cheung Holdings and Cheung Kong (Holdings).

   At the end of last month, Paul Y had 40 contracts on hand with an aggregate value of $7.8 billion.

   BIL, which is listed in New Zealand, London and Australia, has diversified business activity covering energy and oil royalties, engineering, construction, property, hotels, transportation, wholesale and retail.

   Its major investments include a 37 per cent stake in Air New Zealand, a 70 per cent stake in British hotel group Mount Charlotte Investments and a 96 per cent stake in Australian Consolidated Investments.



Paul Y in $245m merger with Downer