Leighton nears sale of fiber-optic asset to Ontario Teachers'

Wed Feb 20, 2013 12:44am EST
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By Maggie Lu Yueyang and Stephen Aldred

SYDNEY/HONG KONG (Reuters) - Australia's Leighton Holdings Ltd LEI.AX said on Wednesday it was in exclusive negotiations to sell 70 percent of its telecommunication assets, including its NextGen Networks fiber-optic business, to Canada's Ontario Teachers' Pension Plan, in a deal valuing the assets at A$885 million ($915.93 million).

Teachers' has been on an aggressive drive into Asia in search of higher returns. Along with many other Western pension plans, Teachers' is actively seeking opportunities for direct investments to increase its profits as it faces the need to provide pensions for ageing populations. Teachers' administers the pensions of 300,000 active and retired teachers in Ontario.

The pension plan also recently emerged as an investor in the latest fund-raising round for China's unlisted online shopping firm, 360buy.

"The sale price is to the up end of what people were thinking the assets might be worth. If (Leighton) does manage to do a deal for that price, that will be a good outcome for the company," said Shane Delphine, an investment manager at Karara Capital in Melbourne.

Delphine also said it was also understandable why Ontario Teachers' only wanted 70 percent of the business.

"Obviously they don't want to operate the assets. They want Leighton to continue to operate the assets" because Leighton still has a number of telecommunications service companies that will be more likely to win business from a 70-30 joint venture than if the assets have been completely sold to a third party.

The $117.1 billion Ontario Teachers' fund, Canada's largest single-profession pension plan, had lined up against Australia's TPG Telecom Ltd (TPM.AX: Quote) to bid for Leighton's NextGen business, sources previously told Reuters.

Shares of Leighton, Australia's largest construction company, rose more than 3 percent on the news to reach A$24.21, the highest level in almost a year. TPG Telecom shares fell 11.2 percent to A$2.46.   Continued...