It’s hard to get a good price when trying to sell assets quickly and cleanly: that’s the juggle inside Lendlease ahead of Monday’s investor day, where writedowns are on the cards.
When it gets here on Monday, the overarching theme of its strategy reset will be scaling back UK/Europe and US construction and development, and repatriating that capital back home to Australia – that much is a given.
In offshore development, the writedowns could be as much as $2 billion should Lendlease want to get out fast and cheap , or $500 million to $1 billion if it moves more slowly and tries to preserve value. It has about $4 billion of capital deployed offshore.Then there are restructuring costs, which could be worth another few hundred million dollars given the size and scale of projects and businesses on the line.
Either way, a writedown of such scale is never a good thing and would mark a costly end to what was once a celebrated global growth strategy.The second path, call it the scorched earth exit, is obviously significantly worse from a value and potential writedowns perspective.If Lendlease wants a quick exit, it is unlikely to be well-priced; if it wants a well-priced exit, it will not be fast.
John Wylie’s Tanarra Capital, underwater on its Lendlease investment, is one of the firmest. It called on Lendlease to exit all international construction – “,” Tanarra said in its letter to Lendlease’s board on April 3 – and realise its $4 billion development asset base “in an orderly value-preserving way”., while HMC Capital, which owns 5 per cent of Lendlease’s issued equity, wants Lendlease to exit non-core markets and consider options to reduce exposure to its construction division.
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