TPG, Ontario Teachers to Buy DTZ From UGL for A$1.2 Billion

Jun 16, 2014 2:59 am ET

(Updates with closing share price in eighth paragraph.)

June 16 (Bloomberg) -- A group led by TPG Capital, the buyout firm started by David Bonderman, agreed to pay A$1.22 billion ($1.2 billion) to buy UGL Ltd.’s property services arm.

The group, including Ontario Teachers’ Pension Plan and PAG Asia Capital Ltd., hopes to complete the transaction in September, subject to regulatory approvals, Sydney-based UGL said in a statement. UGL, which is evaluating “a range of options” for the net proceeds of A$1 billion to A$1.05 billion from the sale, also said Ross Taylor had been appointed as the company’s new chief executive officer from Nov. 24.

“This puts cash back onto UGL’s balance sheet and allows them to refocus on the engineering business, which has really been struggling,” Evan Lucas, a market strategist at IG Ltd., said today by phone from Singapore. “It looks like a pretty strong price, though perhaps not as much as the A$1.6 billion that some analysts were expecting.”

TPG adds to its investments in Australia, including Inghams Enterprises Pty, the nation’s biggest poultry producer, last year. The Fort Worth, Texas-based buyout firm raised $2.9 billion for its sixth Asian fund as of April and planned to close it at as much as $3.5 billion, people with knowledge of the matter said at the time.

UGL’s sale of the real estate division -- created through a merger of DTZ Holdings Plc, which it purchased in December 2011, with its existing property business -- comes after the company said last year it would split into two. UGL also provides engineering, construction and maintenance services for rail, infrastructure and resources projects in Australia, New Zealand and Southeast Asia, according to the statement.

‘Fair Valuation’

After considering the split, UGL’s board decided the bid was in the best interests of shareholders and that it represented a “fair valuation,” UGL Chairman Trevor Rowe said in the statement. The company, led by outgoing CEO Richard Leupen, will have sales of A$2.3 billion and 6,650 staff after the divestment of DTZ.

UGL should keep the proceeds as cash until an upheaval in the engineering sector subsides and then make a decision on how to use the funds when its 2015 financial position is clearer, IG’s Lucas said.

The shares rose 0.6 percent to A$6.98 at the close in Sydney, valuing the company at A$1.16 billion. They have declined 4.5 percent this year.

Renewed Leadership

DTZ had revenues of A$1.9 billion in fiscal year 2013, and employed 45,000 people globally, including contractors, according to UGL.

DTZ Chief Executive Officer Tod Lickerman will stay on in the role and former CBRE Group Inc. CEO Brett White will become executive chairman of the unit in March, the TPG-led group said in a separate statement.

Ontario Teachers’, the largest pension in Canada’s most populous province, agreed last year to buy 70 percent of Leighton Holdings Ltd.’s telecommunications assets for about A$620 million. In 2010, the fund agreed to buy the lease for the Sydney Desalination Plant alongside Hastings Funds Management Pty for A$2.3 billion.