This article is from the Australian Property Journal archive
LENDLEASE has reached a binding agreement with US construction firm, Consigli Construction Co for the sale of its US east coast construction operations.
Lendlease announced in May it had struck a deal with Consigli to sell the business, wasting no time on its $4.5 billion promise to jettison its offshore projects and focus on its Australian operations, amid growing pressure from shareholders after a string of soft results.
Under the terms of the transaction, Consigli will acquire substantially all of Lendlease’s current east coast projects and the rights to secure projects where Lendlease is in a preferred position for an estimated consideration of $30 million to $50 million, the property giant said.
The consideration comprises a profit share and earn out arrangement payable two years post-completion of the transaction. More than 400 people, representing about 90% of Lendlease’s US construction employees, will transition to Consigli.
Lendlease anticipates the sale to be broadly neutral in terms of cash, capital and profit over the two-year period. Net losses and net cash outflows including working capital, legal, transaction and project costs in FY25 and FY26 are anticipated to be offset by net cash inflows and net profits in FY27 from the above consideration.
Completion is targeted by the end of calendar 2024 and final settlement two years after completion.
The transaction is a sale of projects rather than entities and Lendlease therefore retains the liabilities for the business, including projects that have been delivered, and expects to manage this risk over time, including through insurance cover and existing provisions as required, it said.
“This transaction is another important step in simplifying Lendlease as we look to lower our risk profile and increase securityholder returns. It’s a positive outcome, both for our US construction team, and for our valued customers, and continues to demonstrate focussed execution of our strategy,” said Lendlease group CEO, Tony Lombardo.
“We continue to progress the divestment of our UK construction operations, to further simplify the group with the objective to be less complex, more focussed, and ultimately more profitable.”
Lendlease swung to a $1.5 billion loss in FY24 as it navigated the exit of its international operations and furthered a substantial asset divestment program.
The loss included $1.384 billion of impairments and charges to implement its new strategy, and takes in $513 million of goodwill primarily from its 1999 acquisition of Bovis Construction which it is currently selling, as well as $260 million in property revaluations to the downside.
Lendlease has also announced it is selling its US Military Housing business for $480 million.
