Leighton’s shares were placed in a trading halt on Wednesday. Photo: Bloomberg
SARAH THOMPSON, ANTHONY MACDONALD AND JAKE MITCHELL
Leighton Holdings’ shares have been placed in a trading halt.
Street Talk reported on Wednesday that private equity giant Apollo Global Management was completing funding for a $1 billion acquisition of Leighton Services.
It’s understood Apollo is looking to finance the acquisition in the United States, similar to Blackstone’s recent purchase of Orica’s chemicals unit. Sources said Barclays was arranging Apollo’s finance and is also sole M&A adviser. Other banks are expected to come into the debt syndicate.
Up for grabs is a bucket of assets which make $2 billion in annual revenue. Assuming 5 per cent margins and $100 million in earnings before interest and tax, a $1 billion price tag would represent a fairly standard 10-times EBIT.
Apollo, led by the highly-regarded Steve Martinez in Asia Pacific, was the underbidder to London-based rival BC Partners for retailer PetSmart in an $US8.7 billion deal announced on Monday. That transaction marked the biggest US private-equity deal for 2014.
Apollo’s only other major investment in Australia is in television, ticketing and digital company Nine Entertainment Co, worth close to $400 million.
Leighton Holdings offloaded its John Holland business to the China Communications Construction Company last Friday. The divestments come as the company’s chief executive, Marcelino Fernandez Verdes, restructures Leighton and pays down debt following Spanish construction group ACS’s $1.15 billion takeover in March.
“We believe asset sales continue to demonstrate the value in the business which, in our view, continues to be under-appreciated a market that appears to continue to focus on sunk costs,” CBA analyst Ben Brownette wrote in a research note to clients on Wednesday.
Verdes will hope the Services deal brings support for his company’s share price. The Leighton boss will be paid an allowance of $495,000 in 2015 and receive 1.2 million share appreciation rights. The rights reflect any stock price increases between March 2014, when Leighton’s shares traded at an average of $17.71, and March 2016.
The maximum price payable per right will be $32.29, giving Fernández Verdes the opportunity to make more than $17 million.
Leighton said its shares would remain in a trading halt for up to two days.