Lendlease Offloads Troubled Services Business

Lendlease has completed the sell down of its two troubled divisions, announcing it has sold its services arm to the listed engineering firm Service Stream for $310 million.

The deal winds up the company’s exit from the field after it sold its engineering unit to Spanish group Acciona in late-2020 through Morgan Stanley and boutique adviser Gresham.

The sale is the first major transaction under incoming leader Tony Lombardo, who took over from boss-of-12-years Steve McCann in June.

Lombardo said the divestment of the services business, along with other divestments including the sale of the engineering business, and US telecommunications and energy businesses, would allow the group to refocus on other areas.

“The divestments, combined with recently announced changes to the organisational structure, better position the group to deliver on our $110-billion development pipeline, continue to deliver our construction backlog and grow our investments platform in a more focused and efficient way,” Lombardo said.

He said the services business deal is expected to complete before the end of 2021 and is subject to conditions including client and third-party consents.

Lendlease first moved to sell its services and engineering operations in 2019 after cost blowouts on projects.

At that time it offered a pre-tax $500-million provision for three underperforming roadworks projects in 2018 and underpinned a $310-million loss in 2019-20.

Lendlease was found to have breached the Corporations Act by failing to properly inform the market of serious problems in its engineering arm that led $2 billion being wiped off its value when the true extent of the problems was revealed.

Incoming owner, the ASX-listed Service Stream, holds a market value of about $350 million.

The company provides integrated end-to-end asset life cycle services to utility and telecommunications owners, operators and regulators across Australia.

Service Stream said the acquisition, being managed by advisory firm Rothschild, will be funded by a $123.1-million one-for-three entitlement offer, a $61.9-million placement and $123 million from a drawdown of debt facilities and available cash.