Costain may sell mining business to trade buyer

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The Independent Online
COSTAIN, the troubled construction group, may sell its Australian mining business to a trade buyer rather than floating part of it on the local stock market.

The group is expected to disclose that it is in talks with several potential buyers when it announces its interim results today. Preparations for the flotation, announced in June, are continuing.

Analysts had estimated that the mining business would be valued at about pounds 90m on flotation and expected the group to sell a 49 per cent stake, raising about pounds 45m. But Costain is likely to demand substantially more from a trade buyer, who would gain full control of the business.

Mining is one of Costain's most profitable businesses, contributing pounds 33.6m to operating profits in 1991 - although that includes the less successful US operation, which analysts say made about pounds 6m. Overall, Costain lost pounds 69.2m in the year because of a pounds 73.6m provision on property and housing land. Interim profits are expected to be about pounds 2m, down from pounds 5.7m last time.

The sale reflects Costain's need to cut its debt. Borrowings stood at pounds 168m, or 52 per cent of net assets, at the beginning of the year and there is a further pounds 52m of off-balance sheet debt relating to the proposed Spitalfields office development. An outright sale of the mining business could raise about pounds 120m.