Downer puts the sealing on its deal for Bitumix

By DITA DE BONI

Australian-listed multinational Downer Group has finally wrested road sealing company Bitumix off BP Oil New Zealand.

Downer was "jilted" weeks before a similar sale was to go ahead in the middle of last year, according to its managing director, Stephen Gillies.

"BP decided last time the sale didn't make sense - that they could improve returns, and they had a desire to compete," he said.

Downer approached BP two months ago to reignite the deal for the subsidiary and found the company willing to negotiate.

"This time, with [BP's] merger with Amoco, the company is more focused on American and European markets and on oil exploration and refinery," he said.

Sydney-based Downer Group - a former Brierley subsidiary and now 48 per cent owned by Hong Kong's Paul Y-ITC Construction - has yet to receive Overseas Investment Commission approval for the January 1 acquisition.

The purchase price of the deal has not been disclosed.

Bitumix is New Zealand's third-largest operator in the sealing and road maintenance business, with 300 staff, 12 locations and an annual turnover of $90 million.

BP's bitumen port plants at Mt Maunganui, Napier, Lyttelton and Bluff are also included in the sale.

The combined business will become part of Downer's Works Infrastructure division, which was originally bought by Downer from the New Zealand Government for $44 million in 1996 as the state-owned enterprise Works Civil Construction.

Downer's Bitumix acquisition follows a joint venture with Caltex NZ for the manufacture of bitumen announced in August, as well as the acquisition of the bitumen and roading businesses of Technic Group late last year.

Mr Gillies said synergies from combining Bitumix and Works Infrastructure would increase that division's turnover to $400 million.

Works Infrastructure chief executive Graham Shaw said another reason for common ownership of the two businesses was that clients were moving to longer contracts and bundling contracts for different services together.

"What clients are doing is putting the risk on the contractor, and a 10-year contract allows the contractor to make investment decisions instead of short contracts which keep the work patchy."

Mr Gillies said New Zealand had been a great training ground for Downer in learning the process of turning a state-owned enterprise - "no continuity, no strategic plan and stagnant under Government ownership" - to a working, thriving private-business model.