It was only a matter of time before the big boys realised the value of Devine...
Press release final version for approval signoff_FINAL Page 1 of 4
1 February 2007 Leighton to acquire 40 per cent stake in Devine for approximately $94.7 million
Leighton Holdings Limited today announced that the company had agreed to acquire a strategic 40 per cent stake in listed developer Devine Limited (ASX: DVN) for approximately $94.7 million.
The acquisition, which is subject to the approval of Devine shareholders, expected to be in late March, will allow Devine to accelerate its diversification and expansion strategy and further diversifies the Leighton Group into the residential property market.
The transaction, if approved, will involve the issue of 94.7 million shares, to bring Devine’s total shares on issue to 236.8 million.
Leighton Holdings Chief Executive Officer Mr Wal King said that the acquisition of the stake in Devine represented a significant strategic move by the Group to expand its property development business.
“The Group has indicated for some time that it is pursuing a range of growth initiatives, which build on our current strategic framework and the strength of our balance sheet. We approached Devine mid way through last year and both companies see the benefits of this strategic alliance,” said Mr King. “We believe that Devine, a leading home builder and developer in Australia’s residential property market, provides the Group with a great opportunity to further diversify.
“Devine offers affordable housing in Queensland, Victoria and South Australia, and is highly regarded for its innovation, modern, quality homes and dedication to service,” he said. “It is also known for its high-rise unit developments, particularly within the Brisbane CBD.”
Devine’s founder and Managing Director Mr David Devine said Leighton’s investment represented a vote of confidence in the company’s strategic direction and management.
“Leighton is a market leader, recognised for its expertise and we would welcome the company to our register,” Mr Devine said. “The Board and management are very excited about the opportunities that this will bring to the company.
“The proposed transaction will allow Devine to fast-track its diversification program and allow it to progress a number of exciting development opportunities that the company has recently identified,” Mr Devine said. “It will also allow Devine to undertake further geographic expansion in the medium term.
“In addition to the equity investment in the company, Leighton and Devine are committed to exploring joint venture development opportunities.”
Since listing in 1993 Devine has developed more than 15,600 homes and more than 2,745 units. During the past two years, Devine diversified its operations including the creation of an in-house construction division, a commercial division and the establishment of a funds management capability.
Devine has also been aggressively building its land bank, increasing its stock in 2005/06 by 61 per cent to 3,028 lots. The company is on track to achieve its target of creating a land bank of in excess of 5,000 lots by June 2008.
“Our current land developments and projects, when completed and sold, will have an end value of more than $2 billion,” Mr Devine said.
In 2005/06 year, Devine recorded a net profit after tax of $18.9 million from revenue of $571.7 million and has forecast that it will exceed this result in 2006/07.
“For the Leighton Group the acquisition is a strategic diversification into a market beyond the commercial property cycle,” Mr King said.
“The Group has grown its non-residential property development business significantly over the past 10 years via Leighton Properties, which is one of the largest players in that market. However the residential cycle is often “out of step” with the commercial property market, as it is at the moment, and this important diversification will allow the Group to further diversify in the broader markets,” Mr King said.
“Residential property development is a $30 billion per annum market .Over the longer-term this market is expected to continue to grow strongly given the strength of the Australian economy and GDP per capita.
“Diversification into the residential development market is a logical strategic move for the Leighton Group and one that we have been evaluating for some time. This is an exciting opportunity for both Leighton and Devine, which should create value for the shareholders of both companies.
“We look forward to developing a positive working relationship with Devine. Leighton will be nominating two Directors for appointment to the Devine Board and will equity account the investment,” said Mr King.
Regards, Snake13
DVN Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
