Lendlease to divest underperforming engineering business for $180 million
Written on the 20 December 2019 by David Simmons
Through FY19 property project developer Lendlease's (ASX: LLC) engineering business has been causing some significant headaches for the company.
The segment was one of the main reasons the company posted a 40 per cent dive in profits, down to $467 million from $793 million.
It is also currently privy to a class action brought by Phi Finney McDonald.
Understandably, the company has now decided to offload the engineering business.
Acciona Infrastructure Asia Pacific will acquire the engineering business for $180 million.
Under the terms of the sale Acciona will acquire the engineering business excluding the NorthConnex and Kingsford Smith Drive projects, which have already been 90 per cent completed by Lendlease.
The group's Melbourne Metro project is also currently excluded from the deal.
This project involves the design and construction of the tunnels and stations package of the larger Melbourne Metro Tunnel project and is being undertaken by a consortium including Lendlease Engineering, John Holland and Bouygues Construction.
Lendlease says the beginning of this project has been slower than anticipated thanks to issues in relation to the scope and costs on the project.
Group CEO and managing director Steve McCann (pictured) says the divestment is the right decision to make for the broader group.
"We believe the sale of the Engineering business represents a positive outcome for our people, our clients and our securityholders," says McCann.
"Acciona is already a leader in the sector in which they operate. Our skilled workforce, client relationships and existing projects stand to enhance their existing footprint in Australia."
Acciona Australia and New Zealand CEO Bede Noonan says the acquisition of Lendlease's engineering arm will grow the company significantly.
"Bringing Lendlease's Engineering business together with Acciona will allow us to create one of Australia's leading tier-one engineering firms," says Noonan.
"Our two organisations share an impressive register of projects within Australia and internationally. Our combined teams will have an opportunity to contribute to some of the most significant infrastructure projects of our generation."
Losing the engineering business won't be cheap for Lenslease. The company anticipates a restructuring cost of $450 to $550 million pre-tax will be incurred.
"This restructuring cost estimate, together with existing provisions, is considered by Lendlease to be appropriate to cover the cost of concluding the projects retained by Lendlease," says Lendlease.
Shares in Lendlease are down 4.69 per cent to $18.00 per share at 10.48am AEDT.
Business News Australia
Author: David Simmons