Spain's Duro Felguera announced a binding memorandum of understanding for the incorporation of Mexican companies Grupo Prodi and Mota-Engil Mexico into its capital, in an operation that aims to make the troubled engineering company viable.

According to what the Asturian group said late on Tuesday, the partners will provide resources to develop Duro Felguera's activity "normally and permanently overcome the extraordinary circumstances of the last few years", as well as allowing "generating opportunities with new industrial projects, providing synergies for the expansion of the business and growth in international areas".

The search for a partner is part of an aid of 120 million euros that the Spanish State granted to Duro Felguera at the beginning of 2021 to help it to survive.

According to the statement sent on Tuesday to the Spanish National Securities Market Commission (CNMV), the proposed structure for the capital entry contemplates "protecting the current shareholders", giving them preferential subscription rights in the operation.

The terms of the announced agreement will be analyzed at a general shareholders' meeting to be called by Duro Felguera in the near future.

90 MILLION INCREASE

The company said that Grupo Prodi and Mota-Engil Mexico have committed to provide financial resources to strengthen its liquidity, "in an operation designed to ensure long-term financial recovery and sustainable growth," according to Duro.

Specifically, the two Mexican groups will provide loans for a joint value of 90 million euros ($95.89 million), which will be repaid through a capital increase that will implement their entry into the shareholding.

The capital increase will consist of two phases. The first will be with cash contributions and preferential subscription for the current shareholders, in the amount of 40 million euros (US$42.62 million), with the specific objective of repaying the loan for the same amount from Mota-Engil Mexico.

In the second part, of 90 million euros plus the interest accrued on the loans, the loans of the two companies will be capitalized.

As a result, Grupo Prodi will have a 31% shareholding in Duro Felguera and Mota-Engil México up to a maximum of 24%. The two groups plan to apply to the CNMV to obtain exemption from the obligation to make a takeover bid.

The price of the new issue is 0.7661 euros (0.8162 dollars) per share, which represents a discount of 17% with respect to Tuesday's closing price (0.9260 euros, 0.9866 dollars).

(1 dollar = 0.9386 euros)

(Information by Tomás Cobos; edited by Darío Fernández)