Lend Lease Is in Talks to Buy Bilfinger's Australian Unit After Failed IPO

Lend Lease Group, Australia’s largest developer, said it’s in talks with Bilfinger Berger SE to buy Valemus Ltd., five months after the German construction company aborted an initial share sale of its Australian unit.

The companies haven’t reached an agreement, and there’s no certainty that a transaction will occur, Sydney-based Lend Lease said in a regulatory filing. No price was stated.

The Australian newspaper reported today that an agreement to buy Valemus for A$1 billion ($1 billion) was “imminent.” Lend Lease shares rose 2 percent to close at A$8.57 in Sydney.

A purchase would “consolidate Lend Lease’s place in the Australian market,” said Angus Gluskie, who manages about $350 million at White Funds Management Pty in Sydney. “There’s likely to be significant opportunity in the infrastructure space in upcoming years, as there’s a raft of infrastructure needed in Australia.”

Bilfinger, based in Mannheim, Germany, in July pulled a planned IPO for Valemus to raise as much as A$1.39 billion after investors balked at the price, which equated to 12 times 2010 earnings. Bilfinger, whose projects have included the Sydney Opera House and the city’s Anzac Bridge, has said it wants to sell its Australian unit to reduce its dependence on construction and build up its services business.

‘No Brainer’

A sale to Lend Lease would be a better option for Bilfinger than an IPO, said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney.

“The price Lend Lease is willing to pay is more or less similar to the IPO value,” Patkar said in a telephone interview. “An IPO is a more intense process. Given a choice between the two, a trade sale is a no-brainer.”

Lend Lease reported A$1.6 billion in cash and A$700 million in undrawn debt facilities as of June 30. The funds gave the company “significant capacity to fund growth opportunities,” Chief Financial Officer Brad Soller said in an earnings statement to the stock exchange on Aug. 16.

The company, which returned to profit in the year ended June 30 on the strength of its Australian operations, is increasing its focus on its domestic business, Chief Executive Officer Steve McCann said earlier this year.

Lend Lease is currently building the A$6 billion Barangaroo South financial precinct in Sydney, the biggest development project in Australia. The company this year completed the south tower of Walton on the Park, a two-building residential project in Chicago, and finished redeveloping the 313 Somerset shopping center on Singapore’s Orchard Road last year.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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