Local rival weighs bid for UGL Bridget Carter and Gretchen...

Local rival weighs bid for UGL

• Bridget Carter and Gretchen Friemann - The Australian
• 16 Apr, 4:28 AM

UGL is being circled by one of its major Australian rivals, according to sources, with the global diversified services company shaping up as the latest takeover target in the industrials sector.
It is understood that work is under way by a prospective suitor for a potential acquisition of UGL, and some have questioned whether it may be a listed competitor, say Downer or Transfield Services.
Transfield was recently a target of contracting giant Ferrovial, which sweetened an initial $1 billion bid in December, but that was rejected by the board too low.
Some say Transfield may embark on an acquisition of UGL to fend off the Spanish suitor, as its shares trade at $1.32, well below the $2 per share offered.
Downer, meanwhile, has recently indicated that acquisitions are on its agenda. However, some doubters wonder whether the firm is too busy digesting its $300m purchase of Tenix in October to buy UGL in the short term.


Adding weight to UGL’s takeover speculation is a rally in its share price, with the stock closing 6.8 per cent higher at $1.495 in an overall weaker market.
The stock of the company, which last year sold its real estate business DTZ for $1.22bn, has been trading at close to three times its earnings before interest and tax.
Its current $250m market value is a far cry from the $3.5bn it was worth in 2007.
However, a difficulty for any suitor would be the problematic Ichthys power project in Darwin.
UGL said in November it had taken an $US85 million provision for the stalled Ichthys LNG project, sending its shares sliding.
It came as the company, which last year reported underlying net profit of $111.7m, also increased the forecast costs for its joint venture power station for the Ichthys project, due to changes in the design and procurement phase of the project.
Some say that UGL would also be attractive to private equity if it were broken up, with Pacific Equity Partners or Kohlberg Kravis Roberts likely buyers.
Last year, TPG Capital considered a full takeover bid for UGL with Jacobs Engineering before it purchased DTZ.
TPG is now said to be in talks to buy US-based real estate firm Cushman and Wakefield.
Various companies are under the spotlight within the mining services space, but the question is how deals make sense in light of predictions that as many as 50,000 job losses will occur in the next 18 months.
Mining services company Bradken was recently on the radar of Koch Industries and PEP, which made a $2.50 per share offer for the business that was rejected by its board.
However, Macquarie Group is also believed to have previously run the ruler over the company with a view to embarking on an acquisition.
Shares in Bradken yesterday closed at $2.22.
This article first appeared in The Australian Business Review.

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