The Australian arm of one of the United Kingdom’s biggest engineering and construction companies has been put up for sale following strong interest from prospective buyers.

In its latest announcement, Kent based building and civil engineering outfit Laing O’Rourke said it had appointed HSBC Investment Bank to lead a formal sale of its Australian operations.

In a statement, the company said the appointment had been triggered following a strategic review of its operations which in turn had followed external interest in parts of its global portfolio, including the Australian business.

“During the 4th Quarter of 2015, the Laing O’Rourke Group Executive carried out a strategic review of its business portfolio, including options as to the allocation of capital over the remainder of this decade,” the company said.

“This review was partially triggered following unsolicited approaches from a number of parties expressing interest in acquiring parts of our business, including our very successful Australian business.”

Based in its North Sydney office, the Australian operations of the company boast a portfolio of more than fifty major current or completed major projects spanning sectors such as buildings, transport, power, water & utilities, mining and oil/gas.

Bagging $6.02 billion in new work throughout 2014/15, Laing O’Rourke came second only to Brookfield Multiplex in a Housing Industry Association/Cordell ranking in terms of the overall dollar value of new projects won throughout the country across the apartment, commercial and civil construction sectors during that year.

The group is also renowned in Australia for its innovation, and has been ranked at number eight in Business Review Weekly’s list of Top 50 innovators for each of the past two years.

The latest announcement comes amid a challenging time for Laing O’Rourke, which lost £58 million (pre-tax) in its most recent full year to March 2015 and has seen its Chief Executive Officer Anna Stewart stand down in December for health reasons.

Along with the sale of its business in Australia, the group said it would also move to streamline its European operations.

It aims to strengthen its position in off-site building and advanced digital engineering as well as beef up investment in its UK operations, where it sees potential for growth fuelled by a government focus upon infrastructure and new housing.

  • One senses that LoR is licking its wounds from recent losses reported on projects in Australia and in Europe. There is an opportunistic exit path to sell the business by trade sale as a market entry proposition, as did Leighton (now CMIC) with John Holland last year. I have been a follower of the LoR story on off-site and digital engineering. They have been pioneers but at some price. Like all major contractors LoR are not up for pre-competitive collaboration with their peers. The UK government's difficulty in implementing its 2025 Construction Strategy is evidence of this. My observation of the off-site efforts in the industry to date, is that they get off, on a poorly informed start. Most lack rigorous evidence of the productivity and effectiveness of "traditional construction" as the necessary benchmark from which to measure improvement.Especially for cost. Most simply attempt to make a case that if they are using modern construction tools or practices that they must be doing "modern construction" better. This is a huge challenge in Australia where there is an effective construction oligopoly that is happy with the status quo and the ability to pass unsustainable costs on to clients. This shields a genuine focus on efficiency and a compelling 5 year plus business strategy. Most analysts see through any smoke and mirrors here. I expect that LoR can only be a trade sale underpinned by other buyer reasoning. It would be hard for an existing oligopolist to show earnings accretion here to justify stamping out another local competitor. The pity is that Australian governments have bought the LoR long term commitment and off-site story from another player who is now exiting upstage right. What next?

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