This article is from the Australian Property Journal archive
LEND Lease is set to bolster its engineering and construction business with the takeover of Valemus Australia, the parent company to Abigroup, Baulderstone and Conneq, from Bilfinger Berger for a bargain price of $960 million.
The sale of Valemus, which is derived from the Latin words strong and healthy, to Lend Lease represents a discount price to the failed $1.39 billion IPO proposed by Bilfinger Berger in July this year.
Weakness in the sharemarket saw analysts talk down the IPO and it was reported that the company was priced at the lower end of $2.20 – $2.50 price range, which valued Valemus at $1.22 billion.
Lend Lease CEO Steve McCann said the acquisition of Valemus will increase Lend Lease’s capabilities and activities in the engineering and construction market and diversify Lend Lease’s position in this sector.
Valemus currently has in excess of 150 contracts in hand and has secured future revenue in excess of $5 billion.
The acquisition is expected to provide EPS accretion to Lend Lease of circa 15% on a full year basis in the first full financial year ending 30 June 2012.
“Lend Lease has acquired Valemus at an attractive price while retaining financial flexibility to fund the group’s significant development pipeline.
“The group’s strong balance sheet, diversified portfolio and significant project pipeline provide a strong platform for earnings growth. Our integrated business model, enhanced through the additional capabilities delivered by Valemus, provides the depth of skills and resources required to successfully execute on our strategy,” he added.
Lend Lease will fund the purchase with cash reserves and a new five year $225 million debt facility. Gearing post the acquisition is expected to be approximately 5.8% taking account of the significant Valemus cash balance of $539 million as at 30 September 2010.
Lend Lease’s investment grade credit rating with Standard & Poor’s and Moody’s (BBB-/Baa3 with a stable outlook) remained unchanged following the acquisition.
S&P credit analyst Paul Draffin said the acquisition is consistent with the group’s growth strategy, by expanding activities in commercial construction and further diversifying its business activities into civil engineering and construction.
“Although we believe that the debt-funded acquisition will absorb most of the group’s debt capacity at the ‘BBB-‘ rating, LLG retains significant flexibility over its capital-expenditure program and has a long track record of capital recycling to minimise the impact of growth expenditure on the group’s balance sheet.
“The Valemus acquisition is not expected to materially change our view of LLG’s satisfactory business risk profile. In our opinion, Valemus is subject to a similar level of operating risk to LLG’s existing businesses and will need to be successfully integrated into the broader group. LLG will remain heavily reliant on effective risk-management practices and controls–including broad project, customer, and market diversity–to mitigate inherent contract and market risks,” Draffin concluded.
Lend Lease shares traded 49 cents higher yesterday at $8.75.
Australian Property Journal
