Lend Lease confirms talks with Bilfinger Berger on Valemus acquisition

Creation Date: Mon, 20 Dec 2010 GMT

Lend Lease confirms talks with Bilfinger Berger on Valemus acquisition

GERMAN builder Bilfinger Berger is set to quit Australia in a $1 billion sale to Lend Lease.
Lend Lease - which confirmed the talks in a statement to the stock exchange this morning - will emerge as the nation's second-largest contractor through acquiring Bilfinger Berger's Valemus unit, which owns Baulderstone and Abigroup.

The Australian on November 20 revealed the negotiations between the two companies and that Lend Lease was being advised by Gresham Partners and Morgan Stanley.

The talks have since progressed to the point where the signing of a sale agreement is imminent. Lend Lease cautioned in its statement there was no certainty of a deal being completed.

Advisers from both sides are working furiously to complete documentation and finalise the contractual arrangements, including warranties over current projects.

The $1bn price tag compares to an earlier valuation of between $1.22bn and $1.39bn for a mooted initial public offering.

Valemus was expected to be one of 2010's big floats. It was set to hit the public market in July until jitters over the debt crisis in Greece and concerns about price by domestic fund managers forced Bilfinger Berger to stop the process

In a float scenario, Rothschild-advised Bilfinger Berger would have been required to keep about $300 million in cash within the unit to back performance bonds on major projects.

Under a trade sale, this will not be required, and it will thus receive a similar amount to repatriate back to Germany.

According to Bilfinger Berger's third-quarter accounts, Valemus produced earnings before interest and tax of €95m ($127m) for the nine months to September 30 and had net assets of €253m.

Valemus has forecast turnover of $4.6bn in 2010.

Baulderstone has 1400 staff and turnover of more than $2bn. Contractor Abigroup, which enjoys a solid reputation as one the country's premier civil engineering and construction groups, also has turnover of about $2bn and is on the shortlist of companies to build the federal government's National Broadband Network.

Valemus's other businesses include engineering and construction contractor Conneq.

Lend Lease is understood to be able to fund the purchase from existing cash on hand and debt facilities, so will not need to raise funds from shareholders.

The planned purchase of Valemus comes as Lend Lease prepares to lodge a bid for some of the Australian shopping-centre assets up for grabs in troubled Centro Property Group's $13bn sell-off.

Lend Lease, which is said to be in a consortium with Singapore sovereign wealth fund GIC and New York's NRDC Equity Partners, is expected to lodge its bid today. The bidding will be fiercely contested and it is expected Lend Lease will face off against other major local property groups including Stockland and Mirvac.

Meanwhile, the company moved last week to lob an indicative bid for the management rights of Australia's second-largest unlisted retirement village operator, the $1.7bn Retirement Village Group.

Shares in Lend Lease rose 1.79 per cent, adding 15 cents to $8.55 in early trade today.

Brett Clegg and Tracy Lee, 'The Australian', 17 December 2010