The $7.21 billion real estate and construction group Lendlease is understood to be a takeover target, with a major Japanese company believed to be plotting an acquisition of the company.
While it is unclear exactly what party is circling, the thinking is that it may be Mitsui.
Apparently the plan by the Japanese is to buy the company before embarking on a break-up, where various parts are offloaded to different suitors.
It remains unclear whether approaches have yet been made to Lendlease.
Lendlease is currently working on a sales process for its engineering and services business through advisers Morgan Stanley and Gresham after the unit recently accounted for $500 million worth of provisions.
The Lendlease share price has fallen substantially due to the challenges, and is now at $12.70 after hitting $20 in August, which could make the group ripe for the picking.
Its debt levels are low — at about 15 per cent — and within its portfolio are lucrative property assets that would no doubt be attractive to suitors at a time commercial real estate remains in strong demand.
Lendlease is the name behind international developments such as Sydney’s Barangaroo and the London Olympic village and has an attractive $74.5bn development pipeline, $34.1bn of funds under management and derives more than half of its earnings from Australia.
It generates earnings from residential and commercial property development, through its design and construction services for major projects, managing assets owned by wholesale investors and through $3.6bn of property investments.
These include its Retirement Living business and US Military Housing as well as commercial property assets such as shopping centres and office buildings.
Japanese groups have shown interest in Australia of late, with the low interest rate environment prompting companies to invest funds to generate strong returns. Nippon Paint last month agreed to pay $3.8bn for Dulux in a deal advised by Macquarie Capital.
Lendlease’s head of Europe Dan Labbad left the company last month and speculation has been mounting that chief executive Steve McCann could soon be staging an exit after a decade at the helm.
Some expect the company’s property chief, Kylie Rampa, to be picked as his replacement.
Japanese groups are also thought to be looking at the Lendlease services and engineering business.
The planned divestment of the division comes after major writedowns of the Sydney NorthConnex Tunnel, the Kingsford Smith Drive project and Brisbane’s Gateway Motorway Maintenance project.
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