Lend Lease buys Valemus construction unit for $1 billion

Property developer Lend Lease has bought construction unit Valemus from Bilfinger for $1 billion; making it the second largest contractor in the country.

Bilfinger decided to sell its Australian asset to decrease exposure to the construction market and refocus on service activities after it backed out of a planned IPO offering of Valemus in July.

The Valemus deal is slated to be finalized next year with the sale price possibly increasing to $1.055 billion and $1.7 billion. The purchase will be good for Lend Lease as it works towards growing market share, increasing earnings and keeping skilled personnel. Lend Lease shares have already increased by 6 percent on news of the sale.

UBS real estate analyst John Freedman said the deal could increase Lend Lease's earnings per share by as much as 17 percent in 2012. "It would seem to me they certainly got it for a price at reasonable margin below what the value of the IPO was," he told Reuters. "From that point of view, they have been very patient and it's a good deal. It's 15-percent plus accretive for Lend Lease. So that's strong upside to earnings."

"There are a whole a lot of variables sitting in there. It requires quite a skill to be involved in construction," Ken Atchison, managing director for Melbourne-based consultant firm Atchison Consultants, said. "They are buying skills and the market share."

Prior to the sale, Valemus, was the second biggest construction and engineering firm in the country with stakes in engineering, building and property, mining and resources, telecommunications, infrastructure services, engineering services and environmental services.