Contractor Leighton is holding on to half its services business in a deal with private equity group Apollo Global Management which will bring in $700 million in cash.
The 50/50 investment partnership includes Thiess Services and Leighton Contractors Services. The deal values the assets at $1.075 billion. About $700 million in cash proceeds which will be used by Leighton to reduce debt.
“By choosing to partner with funds managed by Apollo, a leading global investment management firm, we gain access to Apollo’s expertise in creating a single, integrated and efficient business which will be better able to compete in the Australian market place,” said Leighton executive chairman and chief executive officer Marcelino Fernández Verdes.
“We will continue to have exposure to the growing services market with its longer-term contracts and steady cash flows, and we will be positioned to allocate funds to the improvement in our gearing and balance sheet, and to the financing of future growth.”
The services business will be one of the largest services firms in Australia with combined 2014 revenue of more than $2.2 billion, about $4 billion of work in hand and 6,400 skilled employees.
The move comes after Leighton last week announced it is selling its engineering subsidiary John Holland for $1.15 billion to Chinese company China Communications Construction Company (CCCC), the fourth largest construction company in the world by revenue.
The divestment of is part of the company’s strategic review initiatives to strengthen the balance sheet.
Leighton’s shares are trading up 1.38% to $22.00.