Construction

Cheques for millennials stokes UK’s asset bubble

8 May 2018

Young people face a turbulent labour market and have less asset wealth than their elders. A think tank’s idea of reforming inheritance tax and giving 25-year-olds 10,000 pounds is better than nothing. But it risks further inflating house prices without deeper structural changes.

India’s top builder starts useful renovation

2 May 2018

Larsen & Toubro is selling its electrical and automation unit to Schneider and Singapore's Temasek for $2.1 bln. It reduces the sprawl of a $30 bln group with lacklustre returns. To achieve ambitious targets could require more remodelling from a CEO less than a year into the job.

USG defensive wall crumbles from intense buffeting

1 May 2018

The plasterboard maker has agreed to discuss a takeover with suitor Knauf. The company had few options after proxy advisers joined top shareholder Warren Buffett in urging negotiations. The only victory USG can aim for now is to wring a few more dollars out of its German rival.

USG bid upsets theory of the free-lunch Buffett

23 Apr 2018

Building-supplies maker Knauf is getting more hostile in its $5.9 bln bid for USG, whose biggest shareholder Berkshire Hathaway seems ready to sell. More recent buyers may not like the meager premium. Investing alongside Warren Buffett is no guarantee of aping his success.

Subsea 7 can still save McDermott from itself

23 Apr 2018

The Oslo-listed oil services group has lobbed in a $2 bln offer for its U.S. counterpart. Subsea 7’s bid looks low, and hinges on McDermott ditching an agreed deal with CB&I. But CB&I’s sale of Stone & Webster to Toshiba is a bad precedent, and Subsea 7 can afford to pay more.

French telco jigsaw missing key regulatory piece

17 Apr 2018

Bouygues could bid for Altice’s French business, Bloomberg reports, to end a painful price war. It’d make more sense than failed 2016 talks with state-owned Orange. But regulators may still prefer four less-profitable operators to three stronger groups with power to raise prices.

Abertis rethink would avoid bidder roadkill

8 Mar 2018

Rival bidders Atlantia and ACS are mulling a breakup of the Spanish group, reports say. It would nix the idea of a European champion. But if Atlantia forgets Spain to focus on Abertis’ other assets, it would be politically easier – and avoid a pricey bidding war.

Cowed LafargeHolcim sets sights appropriately low

2 Mar 2018

The new boss of the world’s largest cement maker has scrapped a share buyback and set the group’s EBITDA growth target at 5 pct. Jan Jenisch can probably do better. Still, given LafargeHolcim’s various headaches since its merger the conservatism is understandable.

Atlantia can just afford to up the ante on Abertis

9 Feb 2018

The Italian toll-road operator may raise its offer for the Spanish peer to at least 19 euros a share in cash, trumping a bid by German rival Hochtief. Despite the lack of clear cost savings, cheap funding makes the combined group’s increased leverage just about manageable.

Capita’s kitchen sink still leaves dirty linen

31 Jan 2018

The UK outsourcing group’s shares slumped 40 pct after its new CEO flagged a 700 mln pound rights issue, asset sales and scrapped its dividend. They should plug balance sheet holes. To recover Capita will need investment, and show how it differs from recently collapsed Carillion.

Bull market lets activists see virtue in passivity

26 Jan 2018

Bill Ackman, who lost his fight with ADP, has taken a stake in Nike but isn’t pushing for change. Dan Loeb sat back as Honeywell’s new boss ignored his advice and beat his targets anyway. Even pushy hedge funds can be tempted to simply ride the waves when a rally lifts all boats.

Chancellor: Carillion’s flaws are common to many

22 Jan 2018

The collapsed UK construction firm’s problems may look idiosyncratic. But its problems with “onerous contracts” were exacerbated by a balance sheet stuffed with intangible assets and ultimately shaky assumptions. These issues are not peculiar to Carillion.

Carillion collapse exposes new bank folly

22 Jan 2018

The failed UK contractor used lenders to finance 412 mln pounds of payments to suppliers when cash was running low. The process, known as “reverse factoring”, seems a lucrative way for banks to provide short-term credit. But insolvency exposes the true extent of the risks.

Carillion mess puts Corbyn a step closer to power

18 Jan 2018

Even before the contractor imploded, the public contracts it operated were known to be expensive. After Carillion it’s hard to argue private sector efficiency justifies the cost. UK Opposition leader Jeremy Corbyn’s preference for a bigger public sector is increasingly in vogue.

UK poorly placed to fight Carillion domino effect

17 Jan 2018

Ministers are fretting about Interserve, after fellow contractor Carillion’s collapse. If this were the banking sector, the state could deploy familiar tools to contain contagion. But the government’s dual role as client and bailout-wary market promoter complicates matters.

Carillion pension hole is ominous for UK companies

16 Jan 2018

Before its collapse the construction firm estimated it owed 587 million pounds to retirees. Britain’s pension protection fund, however, reckons the shortfall is nearer 900 million pounds. That’s bad news for Carillion’s creditors – and for other groups with big liabilities.

Carillion collapse is UK outsourcing stress test

15 Jan 2018

The troubled construction firm has gone into liquidation after failing to secure fresh funds. The UK government was right not bail out one of its key suppliers. Nevertheless, a messy cleanup will raise questions about the risks in handing state work to private contractors.

Blackstone exploits lack of virtue in CDS market

11 Jan 2018

The investment firm’s GSO unit is trying to engineer a default at Hovnanian to make more money as part of a $363 mln restructuring. Sellers of credit insurance may cry foul, but the homebuilder’s investors are cheering. The nature of default swaps can create perverse incentives.

Saving Carillion will cost banks and investors

9 Jan 2018

The troubled building services group is due to meet creditors to lay out a plan to avoid financial doom. That will require it to write off almost half its 925 mln pounds of debt. Though shareholders may put up some cash, banks will be forced to take the biggest hit.

M&A deal finds Saudi diversity but few believers

18 Dec 2017

McDermott is barely paying a premium for CB&I. Yet the transaction reduces the energy-infrastructure firm’s reliance on the turbulent Middle Eastern kingdom, and should yield cost savings worth over $1.5 bln. Investors are skeptical any player can thrive given oil’s troubles.