By Rebecca Thurlow And Daniel Stacey
SYDNEY--Australia's biggest construction company, Leighton
Holdings Ltd., has agreed to sell half of its services arm to
private-equity firm Apollo Global Management for 700 million
Australian dollars (US$570 million) in cash.
Leighton said Wednesday it will form a 50:50 joint venture
partnership with Apollo comprising the combined operations of its
Thiess Services and Leighton Contractors Services units, which
build and manage communications, energy and infrastructure projects
across Australia.
Apollo's purchase will help it further expand its focus on
construction and engineering services firms, branching out beyond
its traditional focus on real estate and debt. In May Apollo
invested US$500 million in CSV Midstream Solutions Corp., a
Canadian engineering and construction firm servicing oil and gas
projects.
Leighton, controlled by Germany's Hochtief AG, which is run by
Spain's Actividades de Construcción y Servicios SA, has been
selling off assets this year as it looks to shore up its balance
sheet following years of financial losses and steep
write-downs.
The company had previously been a large beneficiary of
Australia's mining-fueled economic boom, which saw a raft of
spending by firms and government on new mines, infrastructure and
property. Though Leighton has a market capitalization of A$7.1
billion, its shares have lost about two-thirds of their value since
2007, when shares briefly topped A$60.
The deal gives the services business an enterprise value of
A$1.075 billion and will reduce Leighton's gearing by about 10
percentage points, the company said in a statement to the
Australian Securities Exchange.
The sale of Leighton's services business comes just days after
it offloaded its John Holland building division to China
Communications Construction Co. for about A$1.15 billion. The
company is also looking to sell its property division, and has been
chasing money it is owed for construction work, particularly in a
Dubai-based joint venture Habtoor Leighton Group, which has
suffered significant write-downs.
Leighton Chief Executive Marcelino Fernandez Verdes announced
the asset sales in June, saying he wanted to streamline the
business and restructure its sprawling group of companies to avoid
overlaps and bring similar operations together. The strategic
review came soon after owner Hochtief upped its stake in the
business to 70%, and then swiftly moved to oust the company's
chairman and chief executive in an attempt to stem losses.
The deal with Apollo is subject to regulatory approvals
including from the Foreign Investment Review Board and the New
Zealand Overseas Investment Office.
Write to Rebecca Thurlow at rebecca.thurlow@wsj.com and Daniel
Stacey at daniel.stacey@wsj.com
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