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South Africa Builders' Stocks Decline on Antitrust Probe

South Africa’s construction and building-material shares dropped the most in more than five months after a company said it’s in talks with the antitrust authority over an industry probe.

The FTSE/JSE Africa Construction & Building Materials Index retreated 2.9 percent, the most since Aug. 30, to 43.52 at the close in Johannesburg. The decline wiped 1.89 billion rand ($212 million) from the stocks’ combined market value, according to data compiled by Bloomberg.

Wilson Bayly Homes-Ovcon Ltd., a Johannesburg-based company with interests contracting and civil engineering, said today that it’s “engaging in confidential discussions with the Competition Commission,” and that it “strongly rejected” any suggestion of criminal conduct. The Competition Commission is reviewing information from participants in the industry, which offered “different levels of cooperation,” said Trudi Makhaya, a spokeswoman for the regulator.

The Hawks investigative unit of South Africa’s police is probing construction companies over alleged illegal collusion for contracts of at least 30 billion rand, City Press reported yesterday.

Seeking Explanations

“Companies involved haven’t come up with a detailed explanation regarding the probe,” and there’s no information on the extent of any fine, Dirk Noeth, a Cape Town-based analyst at Avior Research Pty Ltd., said in a phone interview. “Negative news has brought attention to the stocks again, with a cautious side.”

All seven stocks in the index retreated, led by a 5.8 percent slide at Wilson Bayly, the most since February 2009, to 145.5 rand. PPC Ltd., which has a 36 percent weighting in the index, fell 0.8 percent to 32.61 rand.

The Competition Commission started fast-track process for the investigation in early 2011, when companies were asked whether they had engaged in “anti-competitive cartel conduct” for contracts issued as far back as three years, Makhaya, the regulator’s spokeswoman, said in a phone interview.

“We are still validating what the companies told us,” she said. “It is a lengthy process.”

Aveng Ltd., which has a weighting of 21 percent of the builders’ index, said in a statement that it has “proactively engaged and cooperated with the Competition Commission and made for applications for leniency in terms of this fast track settlement process.” The company has made provisions for a “potential penalty” by the authorities, it said. The stock fell 4 percent to 17.59 rand.

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