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For London, What Price Victory?

By Clive McDonnell British officials are toasting London's selection on July 6 as the host city for the 2012 Olympic Games after a lengthy competition with four other cities. But London's victory could be expensive.

Take a look at the estimated cost of the bid. The British Olympic committee has put the estimated cost of staging the games at €4.1 billion. If that figure sounds familiar, it is -- close to the initial estimate of the cost of the 2004 Athens games. However, Athens eventually racked up €9 billion tab. China, which will hold the games in 2008, has estimated the cost at €19 billion.

POSSIBLE BENEFICIARIES. This raises the prospect of a winner's curse, in Standard & Poor's view. Given that the cost of each successive Olympic games have exceeded the prior one, the British estimate looks hopelessly optimistic, even before taking account of its poor reputation in delivering big infrastructure costs on budget.

But while British taxpayers may have to dig a bit deeper if the Athens experience is any guide, at least one group could emerge as a clear financial winner: construction companies. In terms of site readiness, Paris probably led the pack of Olympic suitors, while Madrid was in the lead when it comes to infrastructure. London ranked last using both these criteria.

S&P has identified companies that could benefit from a decision to award the games to London. Listed beneficiaries, with market cap in parenthesis, include Mowlem (€340 million), Hanson (€6 billion), J Laing (€825 million), and McApline (€535 million) from Britain; Bouygues (€12.5 billion) from France; and Ferrovial (€7.5 billion) from Spain.

Multiplex and Bechtel could also be winners in the construction boom. However, the former has had its fingers burned with the new Wembley stadium, and the latter is unlisted. McDonnell is European equity strategist for Standard & Poor's

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