Bloomberg News

Portuguese Builders Must Merge to Survive, Association Says

October 03, 2011

Oct. 3 (Bloomberg) -- Portuguese builders need to merge if they want to succeed abroad and escape a slump in the local economy, the head of the country’s biggest construction industry association said today.

“There is no alternative,” Ricardo Pedrosa Gomes, president of the Association for Public Works and Construction said in a telephone interview.

“The banking sector, which has loaned large sums of money to the building sector, is interested in seeing some mergers,” Gomes said, without saying how he got this information.

With Portugal’s economy expected to contract in 2011 and 2012 amid deep government spending cuts to comply with a $78- billion-euro bailout from the European Union and the International Fund, Portuguese companies are flocking to the former colonies of Angola and Brazil for growth. Gomes estimates that, on average, four building companies declare bankruptcy in Portugal every day.

Mota-Engil SGPS SA, Portugal’s biggest publicly traded company in terms of market value, and smaller rival Soares da Costa SGPS SA, already have operations in Angola. Both companies have said they were looking to increase their presence in Brazil through acquisitions.

“We need to venture abroad. But to succeed, our biggest companies need to merge to gain weight,” Gomes said. “There are no prospects for the domestic market.”

Brazil, which will host soccer’s 2014 World Cup and 2016 summer Olympics, will grow by 3.8 percent in 2011 and 3.6 percent the following year, according to the IMF’s World Economic Outlook published last month.

Angola, rebuilding from a 27-year civil war that ended in 2002, is expected to expand by 3.7 percent this year and 10.8 percent in 2012, the IMF predicts.

--Editors: Andrew Noel, Thomas Mulier

To contact the reporter on this story: Henrique Almeida in Lisbon at halmeida5@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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