Private equity firm last one in mix to buy UGL’s transport division

UGL’s transport division manufactures buses, maintains rail infrastructure and oversees public transport services across five major cities. Picture: NewsWire / Max Mason-Hubers

The $1bn sale of UGL’s transport division appears to be nearing conclusion, with industrial heavyweights Service Stream and Ventia both withdrawing from the auction, leaving a single private equity group as the likely buyer.

Both Australian-listed companies took a look at the opportunity early on, but are now understood to have staged an exit.

Sources close to the process said an offshore buyout fund has emerged as the frontrunner, and though Platinum Equity had been in the mix, another international private equity player remains in contention, say sources.

Investment firms with transport sector experience include Blackstone and EQT.

Final bids for the business are due in mid-October, with Macquarie Capital managing the sale process that was first revealed by DataRoom in July.

The transport unit, owned by CIMIC Group through its Spanish parent ACS, generates approximately $1.5bn in annual revenue and more than $100m in earnings.

Market estimates suggest it could fetch five to six times earnings. UGL’s transport division has built more than 11,000 locomotive wagons and maintained 3000 rail passenger cars, with state governments as its primary clients.

The business manufactures buses, maintains rail infrastructure and oversees public transport services across five major cities including Melbourne, Sydney, Canberra, Adelaide and Auckland.

While the division ranks second to market leader Downer, it has delivered strong profitability for CIMIC.

However, private equity buyers may be deterred by lower margins compared with other investment opportunities.

The sale comes as ACS faces pressure to reduce debt and recycle capital, with CIMIC also grappling with costly claims on building projects. ACS reported net debt of €2.8bn ($4.99bn) at March, despite generating €827.6m in annual profit for 2024.

CIMIC acquired UGL in 2016 for $524m following a takeover battle for the then-ASX-listed engineering services provider.

UGL positions itself as Australia’s only contractor offering in-house design, construction, commissioning and maintenance services across both road and rail networks.