Investor Victory: Lendlease Announces Major Overhaul and Exit from Overseas Assets

High-profile investors in Lendlease have achieved a significant win as the company’s management unveils a bold restructuring plan. ASX-listed Lendlease revealed a series of strategic changes, including the phasing out of its construction businesses in the US and UK to bring back $4.5 billion in capital. This move, expected to result in close to $1.5 billion in write-downs and job cuts, was a key demand from investors such as John Wylie’s Tanarra Capital, Allan Gray, and David Di Pilla’s HMC Capital.

Lendlease currently operates with three main divisions – development, construction, and funds management – with a market value of $4.06 billion. The workforce reduction is anticipated to stem from the international construction arms, leading to a total staff count of 4400 employees. Focusing on Australian projects and managing its global investments, investors remain cautiously optimistic about CEO Tony Lombardo’s ability to execute the plan.

Lombardo, who faced investor scrutiny, retains his position as CEO and is set to engage with dissatisfied investors before embarking on discussions with joint venture partners. Tanarra Capital praised the change in strategy, calling it a positive step forward. The company’s creation of a Capital Release Unit to oversee up to $4.5 billion in asset sales and subsequent disbandment post-sales was welcomed as well.

Further initiatives include a $500 million share buyback, goodwill writedowns linked to the US and UK construction businesses, and impairments on certain overseas development projects. Tanarra Capital emphasized the importance of appointing a new external chairman following Michael Ullmer’s retirement in November, as well as the broader board renewal process.

In response to the announcement, Lendlease’s shares surged nearly 10%, closing at $6.36. Moody’s Ratings VP Ian Chitterer commended the asset sales, cost reductions, and business exits as credit-positive actions. However, he cautioned that the company’s credit quality over the next year and a half hinges on boosting earnings, finalizing transactions, and reducing debt levels.

Lombardo affirmed the firm’s commitment to implementing the outlined changes, ensuring a focus on creating lasting economic value. He reassured customers and employees of their dedication to upholding commitments and respecting personnel as the business undergoes transformation. Lendlease’s determination to deliver on the restructure plan is firm, with promises of additional positive developments in the near future.