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Balfour Beatty snaps up slice of Gammon

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BALFOUR BEATTY is to merge its Hong Kong contracting operation with local construction giant Gammon Construction.

The move follows Balfour Beatty's decision to buy a 50% stake in Gammon from Swedish contractor Skanska for HK$510M ($58M). The other 50% is held by Hong Kong based conglomerate Jardine Matheson.

The deal is expected to be completed later this month.

Skanska decided to sell the stake so it can concentrate on core markets in Europe and the United States.

Skanska's presence in the highly competitive South East Asia market is relatively small, said finance director Hans Biork.

The Swedish contractor inherited the stake when it took over Kvaerner Construction in 2000.

Balfour Beatty said it was buying into Gammon because the deal would increase its already strong presence in the region. This includes a contracting business in Hong Kong and a rail business in Malaysia.

'Our business model is different to Skanska's, ' said a Balfour Beatty spokesman. 'We want to be as big and strong as we can be in the region or area we choose to make our domestic markets, ' he said.

The Gammon deal will create a $800M a year business.

Gammon has a turnover of $685M with 85% of this coming from Hong Kong where it is involved in civil engineering, foundation engineering and major building projects. It operates on a margin of around 2.5%.

It said the deal would also give it access to Jardine Matheson's contacts in South East Asia and China.

Jardine Matheson is a diverse conglomerate with interests in retailing, hotels, motor trading and insurance.

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