Aim of sale to strengthen Hawkins

The prospective sale of New Zealand’s second biggest construction business was partly prompted by the rising value of project bids, says a construction company chief.

David McConnell, managing director of McConnell Group in Auckland and a Hawkins director, said the sale of Hawkins — second only to Fletcher Construction — was partly prompted by a widespread industry trend.

The McConnell family owns Hawkins.

“The reason for the sale is to increase Hawkins’ balance sheet strength significantly, an outcome that the family could not achieve alone,” McConnell said of the planned sale to AS X-listed Australianhead quartered infrastructure and mining firm Downer EDI.

“This means that Hawkins can support further growth and meet the significantly higher bonding requirements on a per project basis, driven by larger projects and high bonding requirements, particularly PPPs (public–private partnerships), and support clients looking for a significantly larger balance sheet to compare more favourably to our major competitors, in particular Fletchers. The sale price is confidential, however it represents fair market value,” he said of the deal.

One building chief estimated Hawkins would be sold for about $50 million, another said only about $25m. But the price is being kept confidential by both parties. No Overseas Investment Office consent is needed. McConnell said advice received was that the purchase was not subject to approval. OIO consent is needed for deals of $100m-plus and if land classified as sensitive is involved in a purchase by a foreign entity.

McConnell said the sale was not prompted by debt and the need for more equity from Hawkins’ owner.

“Hawkins does not have any debt of significance,” McConnell said.

But in response to questions, he did acknowledge issues with one big overseas project. “With regard to the Indonesia geothermal project, it is a complicated project requiring appropriate focus. However its anticipated financial outcome is not overly significant,” he said.

In 2015, Hawkins announced it had won contracts to build two Indonesian geothermal power projects: Lumut Balai and Karaha, both owned by state-owned Pertamina Geothermal Energy. Hawkins went into a joint venture with Indonesian partner Banguan Cipta Kontractor on those two projects.

The sale price is confidential, however it represents fair market value. David McConnell