Leighton Holdings has intensified its sales campaign for its property development arm, holding talks with the country’s largest developers in the past week in an effort to drum up interest.
The $7.7 billion Australian construction company will report its half-year results for the 2014 financial year today, with analysts expecting it to reaffirm its full-year guidance of $540 million- $620m net profit.
The latest development over its real estate business comes with reports emerging from Spain at the weekend that Ferrovial is offering $1.5bn to buy Leighton contractor John Holland, a price above one analyst’s valuation estimate of $1bn-$1.36bn.
The assets are part of a portfolio earmarked for sale by Leighton following a proportional takeover bid of the company earlier this year by Hochtief, the German company controlled by Spanish construction giant ACS.
However, sources told The Australian that the country’s largest residential developer, Stockland, is believed to be the only local player with a potential interest in Leighton’s property arm, adding that the interest was very preliminary.
Talks had been held with major listed groups such as Dexus Property, the Morgan Stanley-backed office landlord Investa and Stockland, in a bid to muster up interest in the business.
ARA out of Singapore had been named as a potential candidate, while Mirvac was also thought to be a logical suitor for some of the properties, given the developer had a joint venture arrangement for the $1bn-plus Green Square mixed-use development project in Sydney.
Put up for sale by Leighton chief executive Marcelino Fernandez Verdes, apart from John Holland, are its services operations, Leighton Properties, its interests in other listed entities, including listed resources group Sedgman, mining-services business MacMahon Holdings and residential property developer Devine.
While Macquarie Capital is handling the sale of Leighton’s services and John Holland business, Bank of America Merrill Lynch is selling developer Leighton Properties as Goldman Sachs is engaging with potential suitors to buy Devine in its entirety.
Leighton made about a quarter of its $24.4bn of annual revenue from John Holland last year, contributing $4.75bn in sales and $128.4m of the company’s net profit of $509m. Leighton Properties and Devine generated $642m in revenue last year, while reporting a $44m annual loss.
Deutsche analyst Craig Wong-Pan predicted Leighton would report today that its work in hand would fall slightly to $40.5bn, from $40.9bn in March, and its debt levels would also be lower after recouping money owed.
“There’s going to be a lot of questions still unanswered, with the major under claims likely to be outstanding,” he said.
Earnings from the businesses that had been earmarked for sale would also be under the spotlight, according to Mr Wong-Pan, with investors trying to determine how much money could be achieved through the sales process.
This article originally appeared in The Australian.