DataRoom AM: Leighton’s Apollo surprise

Leighton strikes a joint venture with private equity giant Apollo, while Boral may be readying to offload its Australian building products division.

Speculation of an imminent deal between Leighton and Apollo Global Management on the former’s services division has proved on the money, but the details of the $700 million deal may come as a surprise.

Elsewhere, private equity weighs a play for a suite of Boral assets, Telstra mulls a major Asian acquisition, and a Recall takeover appears increasingly unlikely in the near term.

Leighton Holdings has wrapped up a busy week with the partial sale of Thiess Services and Leighton Contractor Services to Apollo Global Management for $700m. The deal involves the merger of Leighton subsidiaries Thiess and Leighton Contractor Services, with the enlarged group to be 50 per cent owned by both Apollo and Leighton. The deal, which comes after many tipped a full divestment, was sealed with an enterprise value of $1.075 billion.

It follows the $1.15bn sale of John Holland last week, providing Leighton with a healthy cash influx to start 2015. The ASX-listed contractor is also weighing the divestment of Leighton Properties and an exit from its 50.6 per cent stake in property developer Devine.

Meanwhile, an unidentified private equity firm is rumoured to be eyeing off Boral’s entire Australian building products division, which includes bricks, roof tiles and timber. A key to a potential $200 million deal lies in today’s ACCC decision on a proposed merger of Boral’s east coast brick operations with rival CSR. Should the merger be blocked, private equity may see value in combining bricks with the roof tiles and timber businesses already up for grabs.

In telecommunications, Telstra is weighing a $1bn-plus play for HK-based undersea cable operator Pacnet. Telstra has been shifting its focus in Asia over the past 18 months with divestments and acquisitions helping to reshape its portfolio.

Should a deal go through the Australian heavyweight will secure over 46,000km of submarine cable between Asia and the US.

In media, APN News & Media’s Australian Radio Network is looking to expand in Perth, closing in on a deal to buy Fairfax Media’s 96FM, according to The Australian Financial Review. An offer is believed to be under consideration by Fairfax for what is Perth’s third highest-rating station.

In energy, investment bankers are still pressing on M&A opportunities, with a push for a tie-up of MMA Offshore (formerly Mermaid Marine Australia) and Miclyn Express Offshore, according to the AFR.

The paper also reports that bankers are keeping a close eye on the performance of Myer amid softening expectations for a strong Christmas. There is speculation a capital raising may be required if the retailer is forced to downgrade profit forecasts early next year.

Elsewhere, Iron Mountain’s $2.2bn takeover proposal for Recall is unlikely to be revisited in the near term if market moves are any guide. The target’s share price has now fallen below the rejected offer price of $7 a share and it is believed there is no ongoing dialogue between the two parties.

Finally, Amcom Telecommunications has accepted a $635m takeover from rival telco Vocus that will create an enlarged $1.2bn group, while oOh!Media has struggled on its ASX debut, giving up 1.6 per cent at the close. The outdoor advertising group did at least recover from an earlier fall of 6.7 per cent.

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