Building business

For most of the process industries, consolidation is a way of life. Every few years, a wave of 'merger mania' sweeps through the oil, chemicals and pharmaceutical industries, leaving behind a melange of hyphenated company names and, unfortunately, a flock of redundant former employees. However, the companies that build the plants - the process contractors - have tended to hold themselves aloof from these trends and remain as they have always been.

Until now, that is.

Recent corporate manoeuvres in the contracting industry have removed some familiar names from the scene and changed the approach of other companies to their markets. Moreover, the current vogue for alliancing agreements has meant that contractors and operators are finding themselves collaborating in unfamiliar ways.

One major change has resulted from Amec's acquisition of the Canadian contractor Agra. The move finally takes Amec global, making it the world's third largest contractor behind Fluor Daniel and Bechtel. Agra's strengths are in maintenance and service rather than in construction, and Amec plans to take full advantage of this. A keen proponent of alliancing, Amec has already moved to close long-term maintenance alliances with British Nuclear Fuels, Millennium Organic Chemicals, AstraZeneca, Huntsman-ICI and Union Carbide. The company is also planning to use Agra's expertise in dealing with pharmaceutical companies to make inroads into this lucrative contracting market.

Meanwhile, two well-known company names, Raytheon Engineering & Construction and Stone & Webster, have disappeared completely.

Raytheon E&C is now part of Morrison Knudsen, which gives the latter strength in chemicals and refining to add to its traditional specialisations in energy, environmental and industrial contracting, and gives it an order backlog of almost $7bn. The sale was triggered by heavy losses on a power station project at Saltend, near Hull, which depressed the division's quarterly earnings so much that the Raytheon parent company directors felt they had no option but to sell.

Morrison Knudsen's gain includes Raytheon's long working relationship with BASF: the German behemoth is using Raytheon technology on new ethylbenzene and styrene monomer plants in Ludwigshafen and Antwerp. Raytheon also has a strong presence in Eastern Europe, where the market is expected to grow rapidly after upcoming operator privatisations have been completed.

S&W was recently snapped up by Jacobs Engineering after a disastrous series of project overruns which led to crippling penalty charges (PE June 2000, p5). Jacobs has also recently bought most of the Dutch contractor Stork Engineering, as part of an expansion into Europe which began five years ago with the purchase of a French firm, Serete.

Kvaerner has also seen changes, although these have owed more sales than acquisitions. Offloading its shipbuilding and its pulp and paper concerns, the Anglo-Norwegian firm is concentrating on areas with a strong bias towards new and developing technologies. Its Process Technology Licensing arm handles proprietary technologies for a range of oxo-alcohols, syngas, hydrogen, methanol, detergent alcohols and amine-related processes, and last year opened a technology centre in Stockton-on-Tees for process development and miniplant testing.

It isn't just the UK and American firms which have seen upheavals. Germany's Lurgi saw its profits decline in 1999, for the first time in several years. Ironically, this was partly due to the company's strength in licensing environmental processes, demand for which has reduced as operators bring their environmental performance into line with regulations. The company aims to overcome these problems through cost-cutting measures. Further changes include a reshuffle of mg's engineering groups which sees many of Lurgi's non-chemical activities transferred into an energy subsidiary, Lentjes, and a fibres division, Zimmer.PE