The final phase of the transformation of the construction industry appears to be in full swing, with the gradual launch of the largest infrastructure program, public and private, in the past three decades. The need for strong, adequately capitalized groups, low valuations of companies on the stock exchange’s “dashboard” and, of course, a significant increase in the backlog brought to the fore acquisitions and mergers to create new schemes.

In fact, even the smallest Tier 6 companies are expected to be affected, according to market leaders, given that some of them may join larger groups by providing personnel, construction equipment, know-how and of course, backlog, important elements in the industry’s ‘next day’. This is also the reason why companies such as TEKAL and Domiki Crete are at the center of their respective discussions. The former is negotiating with Intrakat and the latter is negotiating its acquisition under the scheme of Wade Adams and Mr. Dimitrios Koutras.

After all, the latter will now most likely make his next business step, returning to the familiar Lemeria, as he is close to acquiring Actor by the Ellactor group. In this way, a peculiar pattern of forces will be created, since part of the agreement of the two parties is also an exclusive cooperation with the “Actor Concessions” of the Ellactor group. Moreover, in most of the contested contracts there is also a construction object, which means that a partner in the construction industry is also needed.

In fact, the management of Ellactor chose the path of outsourcing, i.e. entrusting all its construction needs to an external partner, refuting everything that was written about the relocation of the Dutch family office Reggeborgh Invest when it first invested in the Greek construction market. The connection of Reggeborg’s main shareholders to the Dutch construction company VolkerWessels, and what has been reported from time to time, hinted that the know-how of a major construction group from abroad would be translated into strengthening Ellactor’s construction arm. However, the actions of the head of Reggeborgh Invest to date show his clear preference for exploiting Ellactor’s other strengths, such as the real estate sector, through REDS and, of course, concessions. However, market sources have calculated in previous days that other company sales should not be ruled out in the future, which would essentially mean the dissolution of Ellaktor, especially if it is decided that the capitalization of the capital gains will be adequate. To date, however, Reggeborgh Invest has invested around 220 million euros in the acquisition of 46% of Ellactor, while it reserves the right to further increase this share to 76% by acquiring a stake in Motor Oil.

Construction companies are able to compete for concessions and PPP projects

GEK TERNA seems to have established itself as a leading force in the sector, with almost double the outstanding balance (4.8-5 billion euros) of the next company. The upcoming sale of TERNA Energy to the Australian group First Sentier will provide it with significant liquidity (estimated at around €1 billion) to fund new projects it is bidding on, such as, for example. concession agreement for Attica Road. The group’s focus will now be on concessions, where it has built a very important portfolio. Characteristically, only under the Egnatia Road concession agreement (operating period 2028-2057) GEK TERNA foresees an operating profit of 6.9 billion euros and a collection of dividends of 2.9 billion euros. These amounts also demonstrate the reason construction groups are looking for “living space” in concessions and PPP projects, sectors that also require significant financial “space”.
• Intracat. This is also what Intrakat’s new shareholders are aiming for as the listed company completed another capital increase last week. The funds of €100 million will be used to repay debts to subcontractors and finance existing projects, while €50 million will be solely for the implementation of acquisitions of other companies, with TEKAL at the center of related discussions. Intrakat’s management strategy is particularly ambitious: it wants to become one of the two or three largest companies in the industry, certainly taking advantage of the development of the industry.
• Abax. On the other hand, steps to stimulate its liquidity have also been taken by Avax, which currently continues its independent course in this sector, but with the support of a strong shareholder such as Mr. X. Ioannou. Other steps (such as a capital increase) may be required in addition to the sale of holdings, such as e.g. the company’s share in the Rio Antirio Bridge Concession Company.
• Mytilene. The presence of the Mytilinaios group is also expected to be stronger following the recent change in its structure and the emergence of the construction sector with a more autonomous presence through METKA and M Concessions. The initial liquidity of the two companies reaches 1 billion euros, of which 300 million euros are deposited equity capital and 700 million euros are letters of guarantee of all kinds.

At the last stage, the deal for the sale of “Actor” and the return of D. Kutras

The upcoming return of Mr. Dim. Coutra at Actor, backed by Wade Adams, seems to create another interesting pole in the sector, if the deal with Ellactor to acquire Actor is finalized, of course.

The latter is expected to return to profitability in 2023, having secured a significant volume of new projects over the previous 18 months. In the first nine months of 2022 alone, the company increased construction volumes by 770 million euros, while the backlog widened to 2.7 billion euros. At the same time, the company discounted projects with an additional cost of 549 million euros in cooperation with other companies. An exclusive collaboration with Actor Concessions will offer him an additional target, depending of course also on the success of the company in question in the individual tenders it bids for.

According to the information, if the relevant agreement is concluded, Wade Adams will acquire approximately 60-70% of Actor, and Mr. Coutras the remaining share.

The total cost of the deal is estimated at 170-180 million euros, which is clearly an attractive price, given that Actor now has controlled borrowing and a significant flow of new projects. However, as has been proven, a strong shareholder is also needed to fund any liquidity problems that arise, which is a key feature of the way the industry has performed in recent years.

On the other hand, Mr. Koutras’ “recipe” in construction seems like it could be upgraded, given that the companies he has run in recent years have had consistent, unprofitable uses. Of course, conditions were not only ideal for the industry, but the market has reported that Mr. Coutras’ policy of high discounts on public works has not produced the expected results.

However, today, given the volume of projects, people with extensive experience in the industry are required to carry out the required “force” management, and Mr. Coutras is probably the most experienced among them. This seems to have been recognized in him by Wade Adams, especially by his head and Cypriot civil engineer Kypros Tsedas. Mr. Tsedas has extensive experience in projects in the Middle East, and Mr. Koutras has many years of experience in projects in Greece and the Balkans. Today, however, the partnership between them concerns the exploitation of opportunities in the Greek construction market.

Numbers

14 billion projects have been auctioned in the last three years.
11 billion outstanding balance of 5 large construction companies.
170 million. the cost of acquiring Actor under the Wade Adams-D. Coutra scheme.
220 million. Intrakat valuation at acquisition in summer 2022.