UGL’s share price collapsed after a sales process for the global services firm’s $1 billion-plus real estate business DTZ failed to drum up strong bidding tension.
Private equity firm TPG Capital was the only party out of four groups in the running to buy the business, a company source has confirmed. Warburg Pincus, Ares Management and Onex were the other contenders.
Last night, UGL shares closed 74c lower at $6.86, down almost 10 per cent, after sliding almost 12 per cent in intraday trade. The shares rallied earlier this month after UGL chief executive Richard Leupen expressed confidence of achieving a strong price for the DTZ business, with final bids closing on Friday.
It is understood UGL is now considering retaining DTZ.
UGL has not confirmed the price TPG offered, but it is understood to be less than the $1.3bn it hoped to achieve. UGL purchased British real estate agency DTZ almost three years ago for £77.5 million and merged it with its existing real estate arm.
A demerger of the business was flagged almost a year ago, with Mr Leupen arguing the growth prospects would be stronger as a stand-alone business, creating more value for shareholders, with capital structures and dividend policies appropriate for its operational and financial requirements.
A sales process began this year through Goldman Sachs after some private equity approaches.
DTZ contributed the majority of UGL’s $36.5m net profit last financial year.
Commonwealth Bank analyst Ben Brownette said in a note that a bid of at least $1.2bn was likely to result in a sale. He said the firm’s valuation of UGL under a “demerger scenario is $7.15-$7.40 per share (depending on costs)”.
An alternative scenario could be a merger of UGL’s engineering business with Leighton Holdings’ services business, should it be placed up for sale, Mr Brownette said.