Restructured engineering and construction group Murray & Roberts (M&R), which offers project lifecycle services in selected natural resources markets globally, is actively pursuing a US acquisition, which it hopes to consummate during the company’s 2018 financial year.
CEO Henry Laas tells Engineering News Online that M&R is assessing opportunities valued at between R400- and R500-million and has whittled down to four the number of prospective acquisition targets. All the companies have a track record of implementing construction projects, primarily in America’s oil and gas sector.
Laas could not be drawn on the identities of the companies, saying only that they are either independent private companies, or units within larger listed groups.
“We already have a strong engineering presence in the US, though CH-IV, but we don’t yet have a construction capability in that market – so we can engineer things, but we can’t build them. We want to buy a company in the US that can bring an implementation capability that we can marry with our engineering capability.”
M&R is not limiting itself to buying full ownership of a company and will consider buying a substantial interest in a larger entity.
“We are far down the line with the targets and the engagements that are taking place now are to establish whether there is willingness, from the side of the targets identified, to consider a potential transaction.”
Acquisitive growth has also been integrated into M&R’s new strategy, which is focused on consolidating the group as a multinational presence in global oil and gas, water and power and underground mining markets.
The strategic overhaul is the product of a far-reaching restructuring process, which has been under way for a number of years and was accelerated during 2017 when the group disposed of its Southern African infrastructure and building businesses to a consortium led by Southern Palace.
M&R is currently in the process of withdrawing from the Middle East general construction market, which emerged as a major drag on the group’s financial performance in 2017, incurring losses of R570-million. It is also in the final stages of selling its steel fabrication business Genrec, with the transaction expected to be concluded by the end of 2017.
M&R’s JSE listing has also been transferred from the heavy construction to the diversified industrial board to reflect the changes that have taken place at the company in recent months.
Notwithstanding a slump in attributable earnings to R48-million, from R753-million, and a weakening in its order book to R26.9-billion from R28.7-billion a year ago, Laas says he is optimistic that 2018 will prove to be the start of a new growth period for the company.
He says the company’s organic growth prospects, particularly in the area of underground mining, are better than suggested by the current order backlog, which he acknowledges as being well below the R35-billion-type-level more in keeping with the company’s size and capacity.
M&R's mining order book has been boosted by a R4.8-billion contract from Kalagadi Manganese. The five-year contract mining project has been in the group's order book since 2015, but the funding structures have now been finalised to enable it to proceed.
“Trading conditions in the mining sector are showing signs of improvement,” Laas says, while acknowledging that conditions in the oil and gas sector remain difficult.