YIT Oyj, Finland’s biggest residential developer, is spinning off the building maintenance unit to focus on expanding its construction business.
The new company, Caverion, will sell shares on Nasdaq OMX Helsinki, YIT said today in a statement. YIT jumped as much as 6.5 percent, the biggest increase in more than six months.
Splitting the company allows Chief Executive Officer Juhani Pitkaekoski to expand the capital-intensive construction business separately from the employee-intensive building systems unit and attract different investors for each part. Building services includes the design, installation and maintenance of heating, plumbing and safety systems.
“A clearer business structure increases the potential for shareholder value creation,” said Chairman Henrik Ehrnrooth. “The growth strategies of the companies are different, and we believe that the separate companies offer more attractive investment opportunities than the current setup.”
YIT’s construction services had combined sales of 1.9 billion euros ($2.6 billion) last year, while building systems had 2.8 billion euros in revenue.
Asked if the construction services unit could be too cyclical on a stand-alone basis, Pitkaekoski said that “there has been in history volatility, and there is going to be volatility in the future.”
Pitkaekoski said residential sales reached an record during the fourth quarter and its business in Russia improved further as the company sold almost 1,300 residential units in the country.
YIT rose as much as 1.06 euros to 17.30 euros in the Finnish capital and as was up 4.7 percent as of 11:09 a.m., valuing the company at 2.2 billion euros.
The company acquired Caverion GmbH of Germany in 2010 for 73 million euros to expand in technical building services in central Europe. Building services drove profit for YIT during the 2009 recession, after which the construction business generated about 60 percent of operating income.
Shareholders, who will be given shares in Caverion and whose holding in YIT will remain unchanged, must approve the plan. The transaction is backed by the four biggest owners with about 28 percent of shares and votes.
The company’s financiers must also agree to the deal. YIT said it has secured sufficient funding, including back-up and guarantee facilities for the business being spun off.
YIT’s net income rose 41 percent to 49.1 million euros in the fourth quarter, with revenue growing 8 percent to 1.28 billion euros. Sales will probably be little changed this year while operating profit is predicted to grow, the company said. The company today proposed raising its dividend to 75 cents a share from 70 cents a share paid last year, the highest since a payout of 80 cents for 2007.