Bilfinger Berger, the German infrastructure group, has sold its Australian construction unit, Valemus, to Australian real estate and infrastructure developer Lend Lease, both companies announced today.
Lend Lease will pay Bilfinger Berger A$1.06 billion (€802 million; $1.05 billion) for Valemus. The sale is expected to net the German company some €500 million, after it repays an intra-company loan to Valemus. But the sale price is less than the A$1.39 billion Bilfinger Berger had hoped to raise earlier this year in a failed public listing of Valemus.
The acquisition, to be concluded in the first quarter of 2011, will be funded from Lend Lease’s cash reserves and a new, five-year A$225 million debt facility, the Australian developer said. However, the extra gearing will not affect Lend Lease’s credit rating, with ratings agencies Moody’s and Standard & Poor’s reaffirming its respective Baa3 and BBB- ratings.
Lend Lease will pay Bilfinger Berger a purchase price of A$960 million. This will be followed by a payment of A$80 million and four A$5 million payments in lieu of 2010 profits.
Valemus is Australia’s second-largest construction company behind market leader Leighton, majority-owned by competing German infrastructure group Hochtief. It includes Abigroup, Baulderstone and Conneq, which specialise in engineering, construction, asset management and maintenance operations.
Steve McCann, Lend Lease’s chief executive, explained the rationale behind the deal: “Valemus has a highly successful and experienced management team with diverse sector expertise that will add to the depth of our Australian management and broaden our skill in the construction sector.”
It will also provide Lend Lease with access to “secured future revenue in excess of A$5 billion” thanks to a pipeline of more than 150 contracts “currently in hand”. Valemus has a presence in roads, rail, social infrastructure, commercial and industrial building sectors through construction, engineering and the provision of services.
For Bilfinger Berger, the sale, first announced in January of this year, is part of the group’s strategy to reduce the output volume of its construction business from the €6 billion recorded in 2008 to around €2 billion in the medium term.