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Lendlease chairman to exit property giant at AGM
Global property giant Lendlease has moved to quell intense shareholder pressure on its management for the company’s underperformance, and confirmed that chairman Michael Ullmer will retire at its annual general meeting in November.
Dissident high-profile investors led by John Wylie’s Tanarra Capital have been calling for management changes to transform the property developer and funds manager into a more simplified business, with an emphasis on being an Australia-focused company.
Lendlease chairman Michael Ullmer will front investors next week.Credit: Eamon Gallagher
Tanarra, along with Allan Gray and David Di Pilla’s HMC Capital, have also raised concerns about the lack of real estate expertise on the board.
Allan Gray chief investment officer Simon Mawhinney said at the company’s client investment conference on Wednesday in Sydney that shareholders wanted Lendlease to sell the overseas operations in which “they have no competitive advantage”.
Ullmer, a former NAB banker, joined the Lendlease board in December 2011 and was appointed chairman in November 2018. The dissident investors had particularly focused their ire on Ullmer and asked for his immediate departure, however, he will remain on the board until the AGM on November 15.
“On a personal note, after 12 years on the board, and almost six years as chairman, I believe that now is the time to commence the process of identifying and transitioning to a new chair. I will seek input over the coming weeks as part of my normal engagement with key stakeholders,” Ullmer said on Wednesday.
The Lendlease shake-up will also see the retirement of long-time non-executive director Nicola Wakefield Evans. She joined the Future Fund board in January.
ASX-listed Lendlease, valued at $4.22 billion, is holding an investor strategy meeting on May 27 where chief executive Tony Lombardo will outline changes to the business.
The measures would involve simplifying Lendlease’s vast operations and further sales of non-core assets. The company already got the ball rolling with the sale last week of its Asian Life Sciences business into a joint venture with Warburg Pincus worth $147 million.
Lendlease on Wednesday said it was looking for Ullmer’s successor to be suitably experienced in the real estate industry. There has been speculation that seasoned property expert and former Mirvac chairman John Mulcahy could be tapped on the shoulder.
“We are looking to appoint an individual who has deep experience in real estate. The board renewal process will continue under the new chair in line with the future strategy and direction of the company,” the firm said in a statement.
In a research note to clients, Citi analysts said activist shareholders in Lendlease have strongly argued for strategy change given the underperformance of the group, and “we therefore believe any change announced in line with the direction that activists have propagated could be positive for the [company’s] share price”.
“However, given multiple attempts at re-steering the group on a new path, execution will be key to win investors’ trust and to attain a sustained re-rating,” the note says.
Investor reaction to the announcement was muted, with Lendlease’s share price dropping 0.2 per cent to $6.10.
Lendlease is also embroiled in a stoush with the tax office over a $112 million bill resulting from capital gains incurred during the sale of Lendlease’s Retirement Living trust.
Citi’s analyst said the tax issue would likely lead to further downgrades to the company’s 2024 earnings.
“While Lendlease has flagged its intention to contest this, some provisions may be warranted, negatively impacting the 2024 results,” Citi said.
“The much-anticipated strategy change should be a positive catalyst, but sustained re-rating will be dependent on the speed and ability of LLC to execute, especially from a likely low starting point of investor trust. We therefore remain neutral [on the shares], and expect any potential share price bounce on the strategy day to fade.”
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