Costain's mines sale falls through

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The Independent Online
Costain, the troubled construction group, produced another unpleasant surprise for its long-suffering shareholders yesterday when it revealed that a deal to sell its US coal businesses had fallen through at the eleventh hour. Just three days ago investors were told at an egm, where they backed a controversial rescue plan, that an agreement to sell the mines had been reached.

A statement said that since Monday's egm the "proposed purchaser has informed Costain that, in the context of its own business objectives, it has decided not to proceed. The board remains committed to the successful sale of the US Coal business and is reviewing a number of options which are available to it."

Costain's finance director, John Campbell, said the news had come to the board on Monday night, after the egm had finished. "We didn't know about it beforehand and were astonished, because we thought things were on course." Shareholders had been told agreement in principle to sell the coal businesses was reached on 12 July.

Yesterday City analysts were not impressed by the explanation: "This is the latest shambles in the Costain saga," one said. "Shareholders have every right to be upset at what appears to be another blunder by senior management." Shares in the group, which resumed trading after the egm vote, fell 0.5p, to 51p.

Costain has refused to reveal the identity of the buyer for the coal businesses, though analysts have suggested it was another US mining firm. Negotiations had continued for an "extended period" and a due diligence survey had been carried out. The asking price for the mines was estimated to be between pounds 40m and pounds 50m.

Costain insisted the collapse of the deal would not affect its survival plan. Intria, a Malaysian construction firm, is underwriting a three- for-one rights issue at 50p a share to raise pounds 73.6m. It gives Intria a stake of up to 40 per cent stake. One of Costain's largest shareholders, Khararafi, a Kuwaiti construction firm, with a 19 per cent stake before the refinancing had voted against the rescue plan.

The coal mines, which are in Kentucky, made a small profit in 1995, but had been heavily loss-making and were considered one of a series of poor investments made by Costain during its disastrous acquisition trail in the 1980s.

Mr Campbell said last night that banking facilities were in place to allow the coal businesses to continue trading.