Dubai-based contractor ASGC is to buy a 15% stake in stressed UK contractor Costain in an investment worth £25m, as part of a £100m rights issue.
Costain announced the rights issue in March after it revealed a £6.6m pre-tax loss in 2019.
It blamed the loss on contract delays, a contract cancellation and a costly arbitration outcome on a major road scheme in Wales – the A465 Heads of the Valleys project – among other issues, reports Construction Manager.Â
However, the Covid-19 crisis has worsened the situation for the firm.
It has warned that in a worst-case scenario it will see six months of disruption to its activities, which could result in a 56% reduction in profit from complex delivery works, a 10% reduction in profit from its high-margin services, and a 43% reduction in new work.
To help secure the rights issue, ASGC entered a binding commitment to invest £25m in Costain shares, giving it a 15.2% stake in the company.
Founded in 1989, ASGC’s projects include the Coca-Cola arena in Dubai and the expansion of Dubai International Airport.
The company has an annual turnover of $1bn and 17,000 employees. It is privately owned by Mohamed Saif Bin Shafar, Emad Azmy and Mohammed Al Sayyah, who remain its chairman, vice chairman and a non-executive director respectively.
Read more about how Costain is addressing its finances at Construction Manager.
Image: Worker at ASGC’s Labour Training Academy (ASGC)