ACCC green light for $1.3b Lendlease, Stockland estates deal
The competition regulator has approved the $1.3 billion acquisition by Stockland of a portfolio of Lendlease’s housing estates, clearing the way for the next leg of Lendlease’s ambitious restructuring program.
The proposed deal, signed last year, had been delayed as the Australian Competition and Consumer Commission extended its review of the implications for competition in regional markets.
The ACCC said on Thursday that it “will not oppose” the transaction on the condition that Stockland sold one of its own housing projects in the Illawarra region in NSW.
Stockland is buying the portfolio of 12 housing estates with Thai developer Supalai. Stockland has given an undertaking that it will divest the Forest Reach housing estate, near Dapto in the Illawarra.
“Without the divestment, the proposed acquisition would bring together the two largest master-planned community projects in the already concentrated Illawarra market,” ACCC commissioner Dr Philip Williams said.
“This could have resulted in increased prices, delayed supply, or reduced quality of housing lots in the Illawarra region, to the detriment of prospective home owners.”
The ACCC said its investigation had found there were few alternative master-planned community projects to constrain Stockland in the Illawarra and that prospective entrants faced challenges, including delays in the availability of essential infrastructure such as sewer and water services.
“The ACCC considers that the divestiture undertaking given by Stockland addresses the competition issues that would arise from Stockland owning both Forest Reach and having an interest in Lendlease’s nearby Calderwood Valley project as a result of the proposed acquisition,” Dr Williams said.
The $1.3 billion divestment is one of a number of major initiatives that Lendlease chief executive Tony Lombardo has flagged as he pursues a radical overhaul of the ASX-listed property giant.
That strategy includes selling down $4.5 billion in assets and exiting Lendlease’s extensive overseas operations. Mr Lombardo has also said he will focus on Lendlease’s more profitable high-rise apartment projects in Australian cities.
The global developer has already cut its staff from 11,000 to 6500 people and would reduce that further to 4000 over the next 18 months.
Citi analysts estimated that the go-ahead for the $1.3 billion sale to Stockland and Supalai, combined with other transactions, would allow Lendlease to book $1.9 billion in disposals out of the $2.8 billion target it had set to achieve within 12 months of its May strategy update.
“We continue to see upside to the shares given execution of asset sale strategy and potential for new project wins which will cement the medium term earnings growth expectations,” the Citi analysts said in a client note.
