Australia’s Leighton buys out Welspun Group’s stake in Indian JV for $99 mn

Australian construction giant Leighton Holdings Ltd has agreed to buy out its Indian partner to take full control of infrastructure contracting joint venture, Leighton Welspun, the company's joint venture in India.

In an announcement to the Australian Stock Exchange (ASX) Leighton said it will acquire Welspun Group's 39.9-per cent stake in the JV for A$ 112 million ($99 million), approximately 614 crore.

Further to Leighton's takeover, the JV will be renamed Leighton India but will have the same reporting structure and remain part of Leighton Asia, India and Offshore (LAIO) business.

The joint venture was formed in 2010 to capitalise opportunities in India's infrastructure and energy sectors, particularly public-private partnership projects. Initially, Welspun acquired 35-per cent interest in the JV for Rs 470 crore and later increased its stake in a cashless transaction worth 115 crore.

The stake sale was triggered by the $3.5-billion Welspun Group's decision to reposition its infrastructure business and to focus on its core areas which include textiles, pipes, energy, and steel.

In a separate statement, Welspun said that it has decided to exit the JV to enable the group to redirect its efforts and reposition itself in the infrastructure space which has synergies with its other businesses.

Welspun is in advanced stages of demerging the parts of its business other than Line Pipes into Welspun Enterprises Ltd through a court, the statement said.

Welspun intends to use the net proceeds from the sale mainly to deleverage the group's balance sheet.

By taking full control of the business, LAIO will undertake a review of its operations and consider integrating several business units to both lower costs and provide greater business opportunities.

Leighton said that it continues to see strong long term prospects in the Indian market.

The company's business transformation program encompassing working capital management; global business services; strategic procurement; management structures; and group asset management aims to strengthen the Group's balance sheet, improve efficiency and lower costs, Leighton said.

The transaction is expected to close in the first quarter of 2014 subject to customary closing conditions.

Leighton expects the transaction to have a negative impact of A$70 million on the company's net profit. However, the company's 2013 underlying net profit will not be impacted and its forecast remains in the range of A$520-A$600 million, it said.

Sydney-based Leighton Holdings is a leading international contractor and the world's largest contract miner engaged in development, construction, contract mining, and operation and maintenance services to the infrastructure, resources and property markets.

The Group owns and operates in 20 countries through a number of diverse and independent operating companies: Leighton Contractors; Thiess; John Holland; Leighton Asia, India and Offshore; and Leighton Properties. The Leighton Group also has a 45-per cent investment in the Habtoor Leighton Group in the Middle East.

Mumbai-based Welspun Group is a Welspun is one of India's fastest growing conglomerates doing business in over 50 Countries and has around 24,000 employees.