Lendlease to sell US construction operations to Consigli
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More news: Lendlease has agreed terms with US construction firm Consigli for the sale of the group’s US east coast construction operations.
It follows Lendlease's announcement on Monday that it would offload $4.5 billion worth of assets from its international operations over the next 18 months, to lower the group's overall risk profile.
The transaction, which is subject to due diligence and finalisation of documents, will see Consigli acquire Lendlease’s US east coast construction operations including approximately 45 current, under contract and pre-construction projects.
As part of the sale, the majority of Lendlease’s US construction workforce will transition to Consigli.
The deal is expected to complete in the first half of FY25.
Lendlease shares were last down 1.4% to $6.15.
What they said: Lendlease CEO Tony Lombardo said: “Today’s announcement represents another step to simplify Lendlease to create a more focussed company for security holders".
"It’s the culmination of more than 12 months’ work refining our US construction activities to focus on the US east coast where we have a clear competitive advantage," he said.
"The sale represents a great outcome for both our people, the majority of whom will move across to Consigli, and for our customers."
Lendlease shares fall despite positive outlook from analysts
The news: Analysts underscored positives for Lendlease after the real estate group unveiled its strategy to offload billions of dollars worth of assets from its international operations, simplify its management structure and undertake cost cuts.
The numbers: Citi analysts said they see "potential upside" to Lendlease's move to undertake asset sales worth $4.5 billion, announced on Monday, given the divestment includes its international construction business which carries a negative asset contribution.
The analysts noted that the strong return track record of Lendlease's Australian business, along with the group's capabilities in urban regeneration and $50 billion funds under management, could see it "closely compared" with the likes of Charter Hall Group and Mirvac Group.
Lendlease shares lowered at the start of trading this morning, dropping 1.9% to $6.12 by 10:30am AEST. Citi's target price on the stock is $6.90, while Morningstar's fair value price is $13.00.
The context: Citi analysts, who retained their 'neutral' rating on the stock, said the new strategy should leave Lendlease "looking much better, with significant value upside". However, the analysts noted that investors may be cautious in the near-term due to the complex nature of closing out of businesses. The company's execution of asset sales will therefore be key to a re-rating, they said.
Macquarie analysts agreed that "execution on divestments with limited impairments" was the "key hurdle" for Lendlease.
Morningstar analysts said Lendlease's restructure was a "good move", with expectations that the group "break ground on more sites, increase sales, and improve its disclosure". They noted that it offered greater certainty, reduced risks, and potentially quick recognition of value, and said they were "highly likely to view Lendlease as considerably undervalued".
On the downside, however, Morningstar said that the move likely relinquishes some of the value in Lendlease's very long-term development projects.
The sources: Morningstar research, Macquarie research, Citi research
