Lendlease construction unit shopped around; Quadrant could sell Adore stake

For the year to June, Lendlease generated $7.2bn of revenue for its construction arm. Picture: AAP

There are rumblings in the market about Lendlease, but this time the chatter is about a sale of its construction arm, with various sources suggesting it’s being offered around the market.

But it may not be Lendlease testing the waters, as its chief executive Tony Lombardo and his advisers continue to stress the importance of winning work and the strong commitment to the unit.

Some wonder whether the talk stems from unhappy investors agitating for change.

Vocal shareholders on the register include David Di Pilla’s HMC Capital with about 3 per cent and John Wylie’s Tanarra with about 2.5 per cent.

Both were formidable bankers in the past, so it’s quite possible they are testing the waters.

Alternatively, an investment bank may be shopping the business to determine whether there’s an offer out there they can take to their client.

There is also speculation over Brookfield’s Multiplex construction arm, so perhaps Morgan Stanley is having some discussions. It has been advising on Multiplex and is also close to Lendlease.

The $4.4bn Lendlease has been under pressure to sell assets to drive down its net debt – $2.4bn as of June, equating to 14.8 per cent – with investors like HMC Capital and Tanarra strongly urging the company not to raise equity.

For the year to June, Lendlease generated $7.2bn of revenue for its construction arm, up 9 per cent from the previous corresponding year, and $90m of earnings before interest, tax, depreciation and amortisation, down 31 per cent.

Observers say that while the Lendlease brand would be attractive to a buyer, potentially a Japanese group or a local industry competitor, they would not want to take on its contingent liabilities from previous projects.

Adore Beauty

Elsewhere, it’s believed that Quadrant Private Equity would be a seller of its 32.59 per cent stake in Adore Beauty if The Hut Group’s offer was firm.

It is understood that Quadrant was not approached by the London-listed suitor over its $1.25-$1.30 per share cash offer for the online cosmetics retailer, suggesting the approach was just an informal discussion.

THG has a £1bn/$1.9bn market value but is believed to be laden with debt.

Yet some think it may lift its bid slightly, to about $1.35 a share, to gain the right to do due diligence on a $100m-odd acquisition.

Quadrant was paid nearly $7 a share for a large portion of its stake during the pandemic, when the business – of which it owned about 60 per cent – was floated with a $653.3m market value.

Selling the remainder at around $1 still makes it a great investment for Quadrant, which will probably be making almost four times its money on a blended basis.