Walter Bau files for insolvency

Walter Bau Has Filed For Bankruptcy After Its restructuring plans, launched last month in a bid to rescue the company by cutting up to € 60 million from its costs, were blocked by at least two of its 27 creditor banks. The company started work to separate the Walter Bau Group into autonomous business units after failing to fully acquire Züblin – in which Walter Bau owns a +53% share holding – at the end of last year. The buyout is believed to have failed due to bank concerns over Walter Bau's liquidity.

The company was Germany's fourth largest construction business, but most parts of the group have now been placed in the hands of a receiver by the district court in Augsburg, Germany. However, the future of four of Walter Bau's subsidiary companies has already been secured. Dywidag Holdings, with a contract volume of € 1,2 billion, will be sold for an undisclosed sum to Austrian contractor Strabag, although this is still subject to approval by Walter Bau's creditors.

“Through this deal Strabag will move a step closer to its goal of becoming one of Europe's leading construction companies,” said Strabag chairman Hans-Peter Haselsteiner. “This acquisition will take our annual turnover to € 7,5 billion and give us 37000 employees.” The new company will trade under the names of Dywidag SF and Ing-Bau GmbH.

According to court receiver Werner Schneider, the sale of Dywidag Holdings, which becomes effective on 1 April 2005, will secure the jobs of around 4100 of Walter Bau's 9000 employees.

“It was inevitable that the insolvency would lead to job losses but Strabag's offer was clearly the best way to prevent total liquidation of Walter Bau,” said Mr Schneider.

Hochtief and Skanska are also believed to have expressed interest in buying other Walter Bau construction units. Walter Bau has just completed work on Berlin's Olympic Stadium and the LTU Arena in Düsseldorf but the prospects for the company's other current construction projects, which are not included in the Strabag deal has yet to be decided.

The operational business of the Walter Bau owned Dywidag Systems International and HELIT Traffic Route Construction are not part of the insolvency procedure. Nonetheless, buyers for both companies are currently being sought. Walter Bau's stake in Züblin is also not part of the insolvency deal but is in the hands of the German state bank Bayerische Landesbank and, according to Mr Haselsteiner, Strabag has not ruled out a buyout of the shareholding.

Some commentators blame Walter Bau's collapse on its failure to expand into foreign markets, and the poor state of the German economy since the post-reunification construction boom ended in 1995. More than two thirds of the company's annual sales were from work in Germany.

The company narrowly avoided bankruptcy in 2001 through a merger with Dywidag Systems International. But the move failed to halt its falling profits, which dropped from € 113 million in 1995 to € 87 million in 2003.