Turkish contractor Renaissance Construction has cut its bid for the Netherlands’ Ballast Nedam by more than 80% after the loss-making builder signalled still more trouble in the year ahead.
Ballast has been haemorrhaging cash on ambitious infrastructure schemes, including burying a national motorway that cuts through Maastricht.
In July Renaissance offered to rescue the Dutch contractor with a bid of €1.55 a share, which was accepted by the Ballast board.
The "white knight" bid came after Ballast posted a net loss of €103m ($116m) for 2014, more than double its loss of €41m in 2013.
But earlier this month, on 9 September, Ballast said it expects to make additional losses of €20m this year caused by "deteriorating results in the building and development division".
At the same time the two companies announced that Renaissance’s bid had been cut to €0.30, more than 80% less than its initial offer.
However, the Ballast Nedam board supports the lower offer. The acceptance period ends 13 November.
Ballast’s poor results have been the result of three bankruptcies of suppliers and partners, including Imtech Building Services, and big losses on ambitious infrastructure schemes.
The most damaging project has been the widening of the A15 motorway in Rotterdam, a public-private partnership scheme in which Ballast was a 40% consortium partner.
Announcing its 2014 results, Ballast said total cost overruns on the design and construction of the A15 had reached €318m ($357m), of which its share of 40% was €127m ($143m).
As part of an urgent restructuring programme, Ballast’s 40% equity stake in the A15 scheme has now been cut to 10%.
Ballast also posted a €26m loss in 2014 on the ambitious scheme to move underground the busy A2 motorway, which cuts the city of Maastricht in two (pictured), and €12m on a public transport hub in Breda.
The losses will lead to a breach in Ballast’s banking covenants, but its lenders, ING Bank, Rabobank and Royal Bank of Scotland, have confirmed that they will keep extending credit if Renaissance goes through with its offer.
Ballast and Renaissance said the deal reflects the long-term growth potential of both companies. They said that Ballast Nedam would benefit from "a strong shareholder" that was willing to inject capital to "increase its solvency and reduce its vulnerability".
It was also said that Ballast Nedam would be less vulnerable to the consequences of cost overruns on large projects.
Renaissance Construction operates in 20 countries, although its traditional strengths are in Russia and Turkey, as well as central Asia, the Middle East, Switzerland and Germany.
Renaissance already holds a 29% stake in Ballast.
Photograph: Ballast lost €26m in 2014 on the ambitious scheme to move underground the busy A2 national motorway, which cuts the city of Maastricht in two (http://www.a2maastricht.nl)