Lendlease presses on with engineering sale

Lendlease has defied speculation in the market that sale plans for its engineering and services operation will not proceed, and is instead pressing on with an auction for the business.

DataRoom can reveal that Morgan Stanley is working on the upcoming process along with Lendlease’s long-term adviser Gresham, and a flyer for the sale has been sent out to the market in the past fortnight.

Morgan Stanley worked on a sale of Lendlease’s retirement operation, achieving a $425 million sale price for a 25 per cent stake in the $1.7 billion business from Dutch pension fund APG in 2017.

Goldman Sachs and Gresham were recently assessing the possibility of a sale of Lendlease’s engineering and services division. However, it is now known that Morgan Stanley is on the ticket, but Goldmans is no longer in the mix.

Samsung and the China State Construction and Engineering Company were believed to have been early suitors, but there has been talk that the sales plans had been shelved, as any party would be unlikely to want its services operations independent of its troubled engineering arm.

But now bidders are shortly expected to return to the mix.

Lendlease is selling its engineering and services business in one line after major writedowns on three of its projects. These include the Sydney NorthConnex Tunnel project, the Kingsford Smith Drive project and the Gateway Motorway Maintenance project in Brisbane, but all are expected to be completed and cleared from its books by 2020.

At Lendlease’s head office at Sydney’s Barangaroo, a wide range of options are being assessed to secure equity, say some sources. However, those close to the company have hosed down speculation that a sale of a stake in its funds management operations is being assessed, describing the operations as core to the property fund manager and builder.

An equity raising for Lendlease has also been played down, as has any possible change to its credit rating.

Lendlease is set to learn in about two weeks whether it secures a contract for Queensland’s $5.4bn Cross River Rail project. While the company remains very much still in the mix, some market analysts believe the two other consortiums headed by Lendlease’s rivals, Acciona and Cimic, are better placed to win, given Lendlease’s recent project challenges.

On offer is the opportunity to build a new 10.2km rail line from Dutton Park to Bowen Hills, which includes 5.9km of tunnel under the Brisbane River and the city’s central business district.

Elsewhere, as reported online by DataRoom yesterday, JPMorgan Australia and New Zealand boss Paul Uren has been promoted to the role of co-head of investment banking for the Asia Pacific region.

Mr Uren will be based out of Hong Kong for the role.

He joined JPMorgan from Goldman Sachs in 2015 when he was initially head of investment banking before taking on the role of chief executive in 2017.

His replacement will be Robert Bedwell.