Skanska AB

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Skanska AB

Klarabergsviadukten 90
SE-111 91 Stockholm
Sweden
Telephone: +46-8-753-88-00
Fax: +46-8-755-12-56
Web site: http://www.skanska.com

Public Company
Incorporated: 1887 as AB Skanska Cementgjuteriet
Employees: 45,063Sales: SKr 79.13 billion (US$9.28 billion) (1999)
Stock Exchanges: Stockholm
Ticker Symbol: SKA.B
NAIC: 233320 Commercial and Institutional Building Construction; 234120 Bridge and Tunnel Construction; 233210 Single Family Housing Construction; 233220 Multifamily Housing Construction; 233310 Manufacturing and Industrial Building Construction; 234920 Power and Communication Transmission Line Construction; 234990 All Other Heavy Construction

After helping to build Scandinavia, Skanska AB is ready to help build the rest of the world. The Stockholm, Sweden-based company is one of the world’s top ten international construction and related services companies, and one of the top five construction companies in the United States. Although the Scandinavian countries and the United States form the company’s largest markets, Skanska is actively pursuing its expansion elsewhere, particularly in Poland, Russia, and other Eastern European countries; the United Kingdom; and in Latin America, starting with its 1999 acquisition of Argentina’s largest construction company, SADE. Skanska participates in nearly every construction and property development segment, from residential building to large-scale public works projects, including bridges and projects such as the Oresund link between Denmark and Sweden, which opened in 2000, and stadiums, such as the Houston NFL stadium, a project worth some US$350 million. Skanska also has made a specialty of sorts in the construction of telecommunications and Internet infrastructure projects, such as the construction of a high-speed fiber optic network for RNC Corporation started in 1999. While operating in more than 50 countries, Skanska has pursued a policy of establishing for itself a“local”presence in its markets, combining acquisitions with organic growth to build a position as a domestic player in each new market. In 1999, Skanska, which trades on the Stockholm stock exchange, posted more than SKr 79 billion (US$9.28 billion) in revenues, with net income of SKr 4.3 billion (US$500 million). Skanska is led by President and CEO Claes Björk.

Cementing Start in the 19th Century

Skanska had its start in the late 19th century as a manufacturer of cement-based decorative building elements, used for dressing up Sweden’s churches and other public buildings. The company was founded as AB Skanska Cementgjuteriet (or Scanian Pre-Cast Cement) by Rudolf Frederik Berg in 1887. Yet Berg’s background as an engineer soon expanded the company’s field of operations beyond decorative elements and into the construction arena itself. By the end of its first year, Skanska had begun producing materials for general construction, such as concrete blocks and other cement-based fittings. But the company also joined in construction projects itself, building upon its expertise in working with concrete.

Although Skanska remained interested in the general construction market, it also became known for its prowess in various construction specialties, such as bridge building, where the company specialized in erecting concrete bridges. The budding telecommunications industry also provided an opportunity for Skanska—and marked the company’s first international contract. By 1897, Skanska had begun to handle large-scale orders for its concrete fittings. This led to a contract with the United Kingdom’s National Telephone Company to supply some 100 kilometers (approximately 60 miles) of hollow concrete blocks used for supporting telephone cables. Skanska was to use this and other similar orders to develop itself as one of the leading telecommunications infrastructure specialists in Scandinavia—and elsewhere in the world.

The British order led the company to seek further foreign contracts. A new large-scale order came at the beginning of the new century, when Tsarist Russia sought to replace the wood-based sewer system then in place in the city of St. Petersburg and throughout the Russian empire. Skanska won the contract to produce the concrete pipes that provided the basis of Russia’s modern sewer system and opened its first non-Scandinavian facility in St. Petersburg in 1902.

Skanska’s Scandinavian home base remained its primary market, however, and over the next three decades, Skanska was able to claim credit for building much of the modern infrastructure in Sweden, Norway, Denmark, and Finland as the company established itself as one of the region’s largest construction companies. Among the company’s most significant projects during this time was its construction of Sweden’s first asphalt road, completed in 1927 in Borlange in the country’s central region. Skanska’s completion of the Sando bridge in 1943 gave it another triumph: at 264 meters, the Sando bridge gained fame as the world’s longest concrete-based arch-span bridge—a distinction held until the 1960s.

Building an International Construction Business for the 21st Century

Skanska began to focus more and more on its international growth following World War II. The company marked a milestone with the introduction of its Allbetong method. Using this system, Skanska was able to produce prefabricated elements for large-scale construction projects, such as apartment buildings and others. Manufactured in Skanska’s factories, the elements were then put into place using construction cranes. The Allbetong method helped cut down on the time and labor involved in a construction project and played a pivotal part in Skanska’s international development, as the company turned more and more to markets beyond its Scandinavian base.

Helping to fuel the company’s expansion was its listing on the Stockholm stock exchange in 1965. Following the listing, Skanska stepped up its international growth, moving into new markets in Africa and the Middle East. After securing a strong position for itself in these markets by the late 1960s, Skanska returned closer to home, entering Poland and the Soviet Union in the early 1970s. Among the company’s major projects in the Eastern European markets during this period was its construction of the Forum Hotel in Warsaw, which featured 750 rooms and also marked the first turnkey hotel project completed by Skanska outside of its Swedish home base.

Skanska also began to move into the United States, one of the world’s largest construction markets. As elsewhere, Skanska sought to foster its international expansion by creating a local presence in each of the markets it hoped to serve. For this the company pursued a number of acquisitions, including Slat-tery, active on the East Coast, and Sordoni, later renamed Sordoni Skanska and placed under the Skanska USA subsidiary. The company was then able to pursue an organic growth strategy in its new markets through its local subsidiary companies.

By the early 1980s, Skanska’s international business had risen to become a significant percentage of its sales. As an acknowledgment of this, the company simplified its name, abandoning the full AB Skanska Cementgjuteriet name after nearly 100 years to become Skanska AB in 1984. Over the following decade, Skanska continued to expand its international business, placing itself among the world’s top ten internationally operating companies (a ranking that excludes certain Japanese construction companies that focus wholly on the Japanese market), as well as occupying a major position in the U.S. market.

The company’s U.S. position was strengthened with the addition of Barclay White Inc., based in Philadelphia, Pennsylvania. Barclay White had long played a prominent role in that state’s construction industry. Founded in 1913, the company originally focused on the greater Philadelphia region, where it completed projects for such clients as Midvale Steel Company, Swarthmore College, Bryn Mawr College, Friends Hospital, and Friends Central School. Major clients in the 1950s and 1960s included SmithKline, Penn Fruit Co., Merck Sharp&Dohme, Continental Can, and General Motors. After adding construction management services at the beginning of the 1970s, the company took itself private. During that decade, and into the building boom years of the 1980s, Barclay White tripled in size, as it took on such projects as the Franklin Institute Futures Center, Bell of Pennsylvania’s Corporate Computer Center, the corporate headquarters for State Farm Insurance, and others. By the late 1990s, Barclay White’s revenues had topped US$300 million.

By the mid-1990s Skanska had succeeded in imposing itself as one of the top U.S. construction companies, winning such contracts as a large share in the US$380 million extension of Boston’s Central Artery. Back home, the company was preparing to fulfill one of its longtime plans. In 1994, Skanska, as majority shareholder in the Sundlink consortium, won the contract to build the bridge portion of the Oresund bridge and tunnel link between Sweden and Denmark, marking the first permanent physical link between the European continent and the Scandinavian region.

Company Perspectives:

Mission: Skanska’s mission is to develop, build and maintain the physical environment for living, traveling and working. By combining its resources in these fields, the Group can offer clients attractive, cost-effective and thus competitive solutions.

Vision: Skanska shall be a world leader —the client’s first choice —in construction-related services and project development.

Skanska had been involved in some of the earliest plans to link the two countries across the Oresund channel. The first proposals to build a tunnel crossing had appeared in the late 1800s. Skanska, joining with Danish construction group Hojgaard&Schultz, launched its own proposal in the 1930s to build a road, rail, and bicycle bridge across the Oresund. World War II intervened with further consideration of the project. As the Scandinavian economies once again began to grow in the 1950s, Skanska and Hojgaard&Schultz again joined together to present a bridge and tunnel proposal. Yet indecision about the project persisted for another 30 years. Finally, in 1991, the Danish and Swedish governments reached an agreement to build a toll-based bridge and tunnel link between the two countries. Bids were accepted, and in 1995, Skanska, as part of the Sundlink consortium, which included Germany’s Hoctief, Hojgaard&Schultz, and fellow Danish company Monberg&Thorsen, won the contract to build the bridge portion of the Oresund link. Construction was completed and the link opened to traffic in 2000.

By the time it had signed the Oresund contract, Skanska already had completed a major move to enhance its U.S. presence, when it acquired Beers Construction Company in 1994. The Beers acquisition gave Skanska a significant presence in Beers’s primary Southeast market, where the company had built up a position as one of the leading construction companies in the area, with operations across Florida, Georgia, North and South Carolina, Virginia, and Tennessee, and with a presence in more than 17 additional states across the country. Beers had been founded in Georgia by two Frenchmen in 1905 as Southern Ferro Concrete Company, specializing in fireproof construction projects using reinforced concrete. Harold W. Beers joined the company in 1907 as senior engineer, then gave his name to the company in 1935. Beers’s Atlanta base placed it in position to participate in the phenomenal growth of that city, which saw Atlanta rise to one of the South’s largest urban centers by the 1990s. The company was involved in the construction of a number of Atlanta landmark structures, including the Southern Bell Headquarters building and others. After developing expertise in hospital construction in the 1970s and 1980s, Beers expanded its operations into the sports world, where it became one of the region’s leading arena construction contractors. After completing the Georgia Dome in the early 1990s, Beers, now a part of Skanska, won contracts to build a substantial part of the Atlanta Olympic Games infrastructure, including the Centennial Olympic Stadium, later renamed Turner Field. In 1999, Beers won the contract to build the Houston Stadium, which was set to become the largest NFL stadium upon completion in 2002.

In Scandinavia, Skanska ran into a hurdle after it acquired a majority share of Scancem, the region’s largest cement producer, which held a near-monopoly on cement production in Scandinavia. Skanska was forced to divest itself of the Scancem holding in 1998. In 1999, the company beefed up a number of its international operations, including in the United States, with the acquisitions of A.J. Etkin Construction Company, renamed Etkin Skanska, and the Gottleib Group. Skanska also entered the South American market for the first time, acquiring Argentina’s largest construction group, SADE Ingenieria y Construcciones S.A., as the beachhead for Skanska’s expansion throughout Latin America.

Closer to home, Skanska continued to pursue its expansion in Eastern Europe. After acquiring a majority share in Poland’s largest construction company, Exbud, in April 2000, Skanska added a controlling share of IPS Praha a.s., the largest construction company in the Czech Republic. Meanwhile, the company was pursuing expansion in a number of new areas, including enhancing its telecommunications and Internet infrastructure arm and boosting its operations in facilities management. Skanska also began to divest itself of a series of noncore operations—such as its shareholding in real estate group Piren AB and bearings manufacturer Aktiebolaget SKF, as well as a number of its real estate holdings, such as properties in London, sold to Sun Life for some US$60 million at the beginning of 2000. The shedding of these assets was part of Skanska’s commitment to rebuilding its identity beyond a pure construction group to becoming a full-scale international construction services provider.

Key Dates:

1887:: Rudolf Frederik Berg founds AB Skanska Cementgjuteriet.
1897:: Company receives first foreign contract.
1902:: Company establishes production facility in St. Petersburg. 1927: Company completes first asphaltpaved road in Sweden.
1952:: Allbetong method of prefabricated construction is introduced.
1965:: Company lists on Stockholm stock exchange.
1974:: Company completes first turnkey hotel project outside of Sweden.
1984:: Company changes name to Skanska AB.
1994:: Skanska acquires Beers Construction Company.
1995:: Company wins contract to build Oresund link between Denmark and Sweden.
1999:: Company acquires A.J. Etkin (U.S.A.); Gottleib Group (U.S.A.); SADE (Argentina).
2000:: Skanska acquires Exbud (Poland) and IPS (Czech Republic).

Principal Subsidiaries

Barclay White Inc. (U.S.A.); Costain Group; Flexator; Heinz Essmann GmbH; Industriventilation Produkt; Poggenpohl Group (Germany); SADE Ingenieria y Construcciones S.A. (Argentina); Skanska AS (Norway); Skanska Danmark A/S (Denmark); Skanska Etkin Construction (U.S.A.); Skanska Europe AB; Skanska International AG (Switzerland); Skanska Oy (Finland); IPS Praha a.s. (Czech Republic; 66%); Skanska UK; Skanska Project Development and Real Estate; Skanska BOT AB; Skanska Oresund AB; Skanska Projektutveckling och Fastigheter AB; Skanska Projektutveckling Sverige AB; Skanska Services; SCEM Reinsurance S.A. (Luxembourg); Skanska Facilities Management; Skanska Financial Services AB; Skanska Forsakrings AB; Skanska IT Solutions AB; Skanska Teknik AB; Skanska Sweden; Skanska Industrial Construction; Skanska International Civil Engineering AB; Skanska Prefab AB; Skanska Road Construction; Skanska Sverige AB; Skanska Underground Construction and Bridges; Skanska (USA) Inc.; Beers Construction Co.; Koch Skanska Inc.; Slattery Skanska Inc.; Sordoni Skanska Construction Co.

Principal Competitors

AMEC plc; Autostrade-Concessioni e Costruzioni Autostrade S.p.A; Bechtel Group Inc.; Bilfinger + Berger Bau AG; Bouygues S.A.; Bovis Lend Lease; Centex; Colas S.A.; Eiffage S.A.; Fluor Corporation; Flour Daniel Inc.; HOCHTIEF A.G.; Louis Berger Group Inc.; Philipp Holzmann Group; Schneider Electric S.A.; Technip; Turner Corp.; Vinci; WS Atkins Plc.