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Midsize general contractor Ando Corp. said Monday it has agreed to forge a capital tieup with Hazama Corp., seeking to inject the troubled builder with 1 billion yen through the purchase of preferred shares.

The deal grants Ando an option to buy a stake of up to 51 percent in Hazama, paving the way for an eventual acquisition in an industry sinking under the burden of overcapacity.

The announcement came after Hazama won approval from 43 creditor banks earlier in the day for a three-year revival plan.

The firm will split its debt-ridden real estate division and construction operations into different companies Oct 1. The real estate unit will assume the bulk of the firm’s interest-bearing debts, which stood at 286.7 billion yen as of Sept. 30.

Hazama also secured a financial rescue package worth some 139 billion yen from the banks. Just two years ago, it received a 105 million yen debt waiver from four main creditor banks.

Detaching the troubled real estate division to free the core construction business of debt is not an original idea dreamed up by Hazama. Another struggling general contractor, Fujita Corp., effected a similar split in October.

Under the alliance, Ando will inject 1 billion yen into the new Hazama construction company, as well as dispatch board members.

Ando President Kosaku Okita told a joint news conference that Hazama’s strength in civil engineering is expected to help expand his firm’s business domain.

Okita did not say whether Ando would eventually exercise its option to buy a 51 percent stake in Hazama and make it a subsidiary.

He brushed aside the possibility of an outright merger, noting that the company cultures are too different to expect any synergy benefits. The firms will remain separate entities even if Ando acquires a majority stake, he said.

Established in 1930, Hazama is known for its civil engineering achievements, including the Kurobe No. 4 Dam in Toyama Prefecture, which was completed in 1963. More recently, it built one of the Petronas Twin Towers in Kuala Lumpur in 1997.

Following the implosion of the asset-inflated bubble economy, however, the firm has been struggling amid mounting debts and shrinking construction orders. It posted a group net loss of 1.66 billion yen on revenue of 416.9 billion yen in the fiscal year ending March 2002.

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