Construction giant Leighton Holdings has sought to shore up its balance sheet with the $218 million sale of Thiess Waste Management (TWM) as it continues to offload assets.
Analysts said the sale to Remondis AG & Co KG gave Leighton some breathing space in relation to a potential capital raising.
Leighton Holdings Chief Executive Hamish Tyrwhitt said the TWM sale and the disposal of its mining subsidiary HWE last year represented about $1 billion of recapitalisation of the business.
“The sale is part of our announced program to recycle capital from non-core into core assets,” Mr Tyrwhitt said in a statement on Monday.
Leighton expects the latest sale to generate a net pre-tax capital gain of approximately $115 million after completion.
Shares in the company were initially sold off and then recovered to close three cents higher at $16.51.
Options Xpress market analyst Ben Le Brun he said he was surprised by the initial negative market reaction because Leighton had fetched a reasonably good price for the asset.
“That’s going to take the pressure off the potential for a capital raising,” Mr Le Brun said.
“There was the perception that they’d have to go down the capital raising path at some stage just to shore up their balance sheet.”
However, $218 million would not answer all of the company’s questions.
“They’ll most likely be looking to divest some of their other non-core assets,” Mr Le Brun said.
Leighton was looking to secure contracts with as many mining operations as possible.
“They want to put the Victorian desalination plant to bed without any further blowouts,” he said.
In a research note Goldman Sachs said the sale of TWM had been expected after being flagged by the company in February.
The sale would mean a two per cent reduction in gearing, suggesting that year-end gearing would fall from around 40 per cent to around 38 per cent.
“This is comfortably within the company’s target range of 35 to 45 per cent,” the note said.
“We view the reduction in gearing as positive.”
Leighton expects to complete the TWM sale by the end of the current financial year.