Apollo agrees partnership with Australia’s Leighton Holdings
Apollo Global Management has agreed to buy half of Leighton Holdings’ maintenance services business, generating cash proceeds of around A$700 million ($573 million) for the Australian construction company.
They will form a 50-50 joint venture comprising Theiss Services and Leighton Contractors Services, which build and manage communications, energy and infrastructure projects across Australia. Apollo's investment values the assets at A$1.075 billion.
The joint venture will be one of the largest services companies in the country with combined 2014 revenue of more than A$2.2 billion, approximately A$4 billion of work in hand and around 6,400 employees. Leighton sees the arrangement as an opportunity to remain involved in the sector while reducing its gearing and strengthening its balance sheet.
"We are very excited to invest in two great businesses in partnership with Leighton. We look forward to working with the services business team to grow a world-class industrial and civil services company focused on continuing to deliver extraordinary results to customers," Steve Martinez, senior partner and head of Asia Pacific at Apollo, said in a statement.
Leighton has been looking to sell off a number of assets following a strategic review of its operations. The company's John Holland building division was recently acquired by China Communications Construction for about A$1.15 billion.
Like many Australian companies with exposure to the resources sector, Leighton has suffered from the downturn in the commodities cycle. It reported revenue of A$11.8 billion for the first half of 2014, up 3% year-on-year, but EBITDA fell 30% to A$843 million and net profit was down 20% at A$291 million. The company's gearing was 37.1%.
The Apollo transaction - which still requires regulatory approval - is expected to reduce gearing by around 10 percentage points.
A number of private equity firms are looking for investment opportunities in the mining services sector where many companies are in need of capital. Earlier this year month, Pacific Equity Partners and Bain Capital offered to buy mining industry supplier Bradken in a A$872 million deal, while in November Centerbridge Partners announced it would support a $352 million restructuring plan for Boart Longyear.
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