Basil Read will make R300m purchase

basil read, the listed construction company, is set to acquire a building company based in johannesburg and pretoria that will double the size of its own building division in a transaction valued at more than r300 million.

marius heyns, basil read's chief executive, said on friday the proposed transaction would require shareholder approval at a general meeting, apart from other regulatory approvals, because its value exceeded 25 percent of the company's current market capitalisation of about r1.3 billion.

heyns confirmed the value of the proposed transaction exceeded r300m.

his comments followed a cautionary announcement from basil read last week advising shareholders the group had entered into negotiations that might have a material affect on its share price if they were successfully concluded.

the announcement led to basil read shares increasing by 3.7 percent to close at r12.75. the shares rose a further 1.92 percent on friday to close at r13.25.

its share price has achieved a 96 percent compound growth in the five years to september last year, rising from r1.40 on october 1 2003, to r25.30 on september 30 last year, although it has dropped subsequently in line with the industry.

heyns said the proposed acquisition was in line with the group's revised target in march to increase its annual turnover to r10bn by 2013. the group earlier forecast it would pass the r5bn annual turnover mark by 2010.

in february the group reported a 73 percent leap in turnover to r3.5bn in the year to december.



heyns confidently predicted on friday that the group's revenue in its current financial year would grow to r5bn.

he said the group had signed contracts and had in- principle approval from its board to carry on with the transaction.

heyns referred to his last financial report about the group's building division, in which he said the exceptional growth experienced masked certain weaknesses within the division, adding that it had reached capacity based on the availability of management and skills.

in the year to december, the group's building division grew revenue to r927m from r401m in the previous year. operating profit declined to r13m from r13.2m in the previous year, resulting from decreased margins of 1.4 percent.

the division's order book was at r618m, which was a manageable level, compared with r1bn a year earlier.

heyns said on friday that the group's building division would be unable to grow further until it obtained additional resources and management skills.

he said the company that basil read planned to buy was a similar size to basil read's own building company, and had a sizeable order book and good potential.

"it is very focused on building and we want to target a lot of ppp (public-private partnership) projects," he said.

"this acquisition will give us a lot of additional capacity to take on more of these sort of projects."