TPG trumped by Canadians in move for Leighton assets
LEIGHTON has entered into exclusive negotiations with the Ontario Teachers' Pension Plan to sell 70 per cent of its Australian telecoms infrastructure assets for about $620 million.
The Canadian pension fund giant, which has $121 billion under management, trumped TPG Telecom as the front-runner in the bid. Leighton's assets include the inter-capital fibre network Nextgen Networks, data-centre provider Metronode and cloud-computing services provider Infoplex.
Leighton's chief executive, Hamish Tyrwhitt, said the sale of the telecoms assets was part of a strategy of focusing on the core construction business.
"A key element of our strategy is the recycling of capital such as our telecommunications infrastructure assets which are considered non-core," Mr Tyrwhitt said.
"The proposed sale follows the completion of a detailed strategic review of those assets."
The construction giant will retain 30 per cent of the telecoms assets and the existing management team at Nextgen will continue to run the business. Leighton's network includes 6000 kilometres of fibre laid in remote areas as part of a $250 million government contract.
The market greeted the news positively, with Leighton shares rising 3.58 per cent to finish at $24.29.
However, a Nomura analyst, Simon Thackray, said he was disappointed with the sale of the high-quality telecoms assets.
"I think it is disappointing that they are selling what they are acknowledging in their own media release to be steady cash-flow assets with growth potential over the long term and low to moderate levels of risk," he said.
He said the company would be left with higher-risk assets with less certain revenue streams.
"What we would be left with is, in a relative sense, a lower-margin and higher-risk business, which is not annuity-style, so everything needs to be won on ongoing basis, has to be hunted and killed on a project-by-project basis," he said.
The Canadian pension fund is a big investor in Australia and was part of the consortium that won the $2.3 billion long-term lease of the Sydney desalination plant last May.
Shares in TPG Telecom dropped as much as 9 per cent.
The market was disappointed that TPG failed to win the bid for Nextgen Networks, which could have created synergies between TPG's metro cable networks and Leighton's intercity networks.