ASX-listed diversified developer Lendlease has appointed Morgan Stanley and local adviser Gresham to run the sale of its underperforming engineering and services business.
It comes after Lendlease last month announced plans to divest the troubled unit, which had formerly been subject to a strategic review.
Lendlease’s engineering unit was hit by heavy losses as concerns about private contractors taking on excessive risks to win low-margin work emerged.
The review was prompted by Lendlease's struggle with three problematic projects, including Sydney's $3 billion NorthConnex Tunnel project, the Kingsford Smith Drive project and the Gateway Motorway Maintenance project in Brisbane, all expected to be completed and cleared from its books by 2020.
Morgan Stanley and Gresham have started the sales process by distributing a teaser document to prospective buyers for the business arm which in the first half of the company’s financial year recorded a $473.7 million loss.
The document said Lendlease's unit had a 50-plus year history building, operating and maintaining public and private infrastructure, and specialised in designing and constructing roads, rail, civil infrastructure and tunnels.
Lendlease claims the unit could be attractive to buyers due to a pipeline of federal and state government work forecast to drive transport engineering growth of about 5 per cent a year for the next five years.
The business will likely be pitched to offshore construction companies that may be considering entry into the Australian market.
Lendlease marked its engineering and services arm as non-core in its fiscal 2019 results following a strategic review and was no longer a required part of the group’s strategy.
The company noted that restructuring the overall business could cost between $450 million and $550 million pre tax as it works through exit options.