City backs Malaysian rescue for Costain

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The Independent Online
City investors have rallied around Costain, the beleaguered construction group, as it struggles to gain the support of shareholders for a pounds 74m rescue deal from Malaysian investor, Intria. But the effects of Thursday's 24-hour postal strike may still leave the outcome balanced on a knife edge, the company fears, when the votes are counted at tomorrow morning's extraordinary general meeting in London.

Kuwaiti building concern MA Kharafi & Sons has said it will vote its 19.5 per cent stake against the deal. Raymond International, a Saudi construction company, is a large unknown, but could also vote against.

A straw poll of institutions, however, shows no City dissenters to the proposal, whereby Intria will gain control of up to 40 per cent of the shares for pounds 41.5m. Costain's banks will also swap pounds 36m of debt for a 35 per cent stake.

The struggling construction group has made it clear that the 50p a share open offer is the only alternative to going into administration.

Among the shareholders to declare in favour of Costain are M&G, with 7.4 per cent of the votes, Guinness Flight, (2.4 per cent), AMP Asset Management (2.3 per cent), and Legal & General (2.4 per cent).

One fund manager said Intria's proposal was "the only game in town at this stage".

Costain has also revealed that its reduced credit worthiness has lost the company business. It lost two big contracts in Hong Kong for this reason. The introduction of Intria will allow it to restore its balance sheet, as well as paving the way to improved access to South-east Asia, where margins remain substantially higher than in the Middle East.