WBHO’s Probuild sale falls through due to Australian national security

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CAPE TOWN - WILSON Bayly Holmes Ovcon’s (WBHO) shares fell more than 2 percent on the JSE yesterday after the group announced that the planned sale of its Australian building subsidiary Probuild fell through at the 11th hour after that government refused the deal in the interests of national security.

WBHO has over the past few months told shareholders that it had received an unsolicited offer from “a major international construction and civil services company” to acquire WBHO’s 88 percent interest in Probuild.

Business Report can today reveal that speculation in the Australian company has risen since either China State Construction Engineering or China Rail Construction Group might have made a bid for the A$1.7 billion (about R20bn) profit-a-year company.

“WBHO has been advised by the potential acquirer of Probuild that it has withdrawn its proposed investment application in Probuild lodged with the Australian Foreign Investment Review Board following advice that its application would be rejected by the Federal Government on the grounds of national security,” WBHO said.

Last year WBHO opted to engage with the potential investors due to the growing risk to the balance sheet of the increasing complexity and size of the Australian business.

In 2019, WBHO flagged that it was considering a number of options to recoup the losses on a road contract in Australia that resulted in an unprecedented A$50 million (R496.1m) loss provision.

The group said the losses were incurred as a result of incorrect interpretation of certain technical specifications, resulting in the under-estimation of the physical work necessary to meet the output specifications of the contract.

Yesterday WBHO said that significant time, investment and ongoing commitment had already gone into progressing the Probuild transaction with due diligence completed.

The group said the commercial terms of the deal had also been mostly agreed between the two parties.

However, Probuild’s fundamentals and prospects in the Australian market remained good, and opportunities for Probuild would continue to be assessed to maximise shareholder and Probuild’s value, the statement said.

WBHO was not immediately available for comment yesterday The group’s headline earnings per share fell 200 percent to a loss of 937 cents a share in the year to June 30, 2020, and it made a R508.1m loss versus a R549m profit the previous year. However, cash flows and balances remained healthy, debt was low and the group was continuing to benefit from strong support from guarantee providers.

The group expected to benefit from the South Africa, Australia and UK government commitments to public infrastructure development in the new financial year and further in the future, as part of the economic stimulus packages in these countries to relieve the effects of Covid-19 on their economies.

WBHO shares closed 1.89 percent weaker at R82.75 on the JSE yesterday.


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