UGL completes £77.5m takeover of DTZ

Australian engineering, construction and maintenance company UGL Limited has purchased London-listed property services firm DTZ Holdings in deal valued at an initial £77.5 million (€90.2 million; $121.3 million).

UGL announced yesterday it had completed the acquisition of “all the trading operations of the DTZ group” and labeled the transaction a “key step in UGL’s journey as the emerging leader in global property services integrating corporate real estate and facilities management services across the globe”.

In one swoop, UGL has added property services including leasing, development, professional services, valuation, investment agency, investment and asset management and consulting and research to its own line of largely facilities-related services. The deal also gives UGL an investment and asset management arm currently managing $10.3 billion of assets, predominantly in the UK and Europe.

UGL said the purchase of DTZ would mean it was able to provide its clients with “a single corporate solutions provider” and that DTZ’s long-established presence in Europe, the Middle East and Asia Pacific was a good geographical fit with its own business which is better established in Australia, New Zealand and North America.

Richard Leupen, managing director and chief executive officer of UGL, highlighted DTZ’s Asia growth prospects as a particularly attractive component of the deal. He said: “DTZ’s broad geographical reach will transform our ability to deliver an integrated full service offering to clients by enhancing our presence and capability in key growth markets such as Asia. We see significant opportunities for growth in Asia, particularly China, where DTZ holds the leading market position in property services with 1,300 professionals in 18 cities.”

The deal ultimately means that UGL now controls a global real estate services business with approximately 24,000 staff working in 225 offices across 45 countries. UGL and DTZ’s merger will reflect a business with a combined annual revenue of about £1.2 billion, making it the third largest real estate services business globally.

UGL financed the acquisition 100 percent with debt funded by new debt facilities but it said that “conservative gearing” had been maintained. The acquisition was executed as a pre-pack administration transaction – a pre-arranged sale that completes typically via an administrator third party at the point of a company going into administration – meaning that all of DTZ’s functions have continued to trade as normal, UGL said.

The acquisition by UGL effectively brings to an end a period of uncertainty for DTZ. Over the past few years, the firm has been the subject of various takeover speculations and latterly was almost merged with one of its European rivals BNP Paribas until that deal collapsed in October.

The collapse of that deal, coinciding with DTZ revealing that all subsequent bids had placed a minimal valuation on the company, saw its share price tumble 85 percent although they have since recovered a small part of that loss following news of UGL’s approach. UGL said in its announcement that because of the minimal valuation, deriving from DTZ’s debt burden, that the transaction would “realise no value for the ordinary shares of [DTZ]”.

Goldman Sachs acted as financial advisor to UGL while Oriel Securities advised DTZ and Ernst & Young served as administrator.