Wal King?s Leighton has increased its foothold in the residential property developments sector by buying a 40% stake in Queensland based developer Devine for $94.7 million.
Leighton’s chief executive Wal King said the acquisition represented a significant strategic move by the group to expand its property development business.
“The group has indicated for some time that it is pursuing a range of growth initiatives, which build on our current strategic framework and the strength of our balance sheet. We approached Devine mid way through last year and both companies see the benefits of this strategic alliance,” King said. “We believe that Devine, a leading home builder and developer in Australia’s residential property market, provides the Group with a great opportunity to further diversify,” he added.
King said the acquisition is a strategic diversification into a market beyond the commercial property cycle.
“The group has grown its non-residential property development business significantly over the past 10 years via Leighton Properties, which is one of the largest players in that market. However the residential cycle is often “out of step” with the commercial property market, as it is at the moment, and this important diversification will allow the Group to further diversify in the broader markets.
“Residential property development is a $30 billion per annum market .Over the longer-term this market is expected to continue to grow strongly given the strength of the Australian economy and GDP per capita,” he added.
The acquisition, which is subject to the approval of Devine shareholders, expected to be in late March, will allow Devine to accelerate its diversification and expansion strategy and further diversifies the Leighton Group into the residential property market.
The transaction, if approved, will involve the issue of 94.7 million shares, to bring Devine’s total shares on issue to 236.8 million.
Devine’s founder and managing director David Devine said Leighton’s investment represented a vote of confidence in the company’s strategic direction and management.
“The proposed transaction will allow Devine to fast-track its diversification program and allow it to progress a number of exciting development opportunities that the company has recently identified,” Devine said. “It will also allow Devine to undertake further geographic expansion in the medium term.
“In addition to the equity investment in the company, Leighton and Devine are committed to exploring joint venture development opportunities,” Devine added.
Since listing in 1993, Devine has developed more than 15,600 homes and more than 2,745 units. During the past two years, Devine diversified its operations including the creation of an in-house construction division, a commercial division and the establishment of a funds management capability.
Devine has also been aggressively building its land bank, increasing its stock in 2005/06 by 61% to 3,028 lots. The company is on track to achieve its target of creating a land bank of in excess of 5,000 lots by June 2008.
“Our current land developments and projects, when completed and sold, will have an end value of more than $2 billion.” Devine concluded.
“We look forward to developing a positive working relationship with Devine. Leighton will be nominating two Directors for appointment to the Board and will equity account the investment,” King concluded.
Australian Property Journal