China Communications to Buy Leighton Unit in A$1.15 Billion Deal

China Communications Construction Co. (1800)Will BuyLeighton Holdings Ltd. (LEI)'s John Holland Unit in a Deal that Values the Builder at About A$1.15 billion ($951 million)

Leighton will use the proceeds to pay down debt and fund growth, executive chairman Marcelino Fernandez Verdes said in a regulatory statement in Sydney today.Australia's biggest builder is controlled by Hochtief AG which itself is majority owned bySpain's ACS Actividades de Construccion y Servicios SA.

Fernandez Verdes, who is also chief executive officer of Hochtief, has vowed to reduce Leighton's debt and simplify its structure since taking his role in March. The group'sthree domestic engineering companies-- Thiess, John Holland, and Leighton Contractors -- compete against each other as independent businesses in similar market segments with differing areas of emphasis.

John Holland's sale price, which includes net debt and is subject to adjustments that Leighton didn't specify, "reflects its position as one of the country's leading engineering and construction companies," Fernandez Verdes, who has been named by ACS ChairmanFlorentino Perezas his successor, said in the statement. The divestment "demonstrates the progress we have made with our strategic review initiatives."

The transaction remains subject to approval by Australia's Foreign Investment Review Board, according to the statement. Chinese companies have announced $2.8 billion worth of deals into Australia in the past year, down 43 percent from the previous 12 months, according to data compiled by Bloomberg.

Separate Leighton units bid against each other for Brisbane'sAirport Linkproject and adesalination plantnear Melbourne. That kind of competition tends to drive down the profitability of construction contracts.

Source: Bloomberg

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