Property service DTZ sold to PE consortium

August 2014 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

On 16 June Australian engineering services firm UGL Ltd announced the cash sale of its property arm DTZ to a consortium including private equity firms TPG Capital and PAG Asia Capital, as well as the Ontario Teachers’ Pension Plan.

The value of the deal, according to a statement released by UGL, is $1.215bn and both sides expect the transaction to be completed in September, subject to the customary regulatory approvals.

UGL began exploring the option of selling the DTZ unit around February 2014 as it looked to cut the debt level of its main engineering division. UGL’s core business has been adversely affected by the slowdown of the Australian mining sector. In a statement announcing the sale of the DTZ brand, UGL noted it will now focus its attention on building up its work in engineering, construction and maintenance services in Australia, New Zealand and Southeast Asia. “To effect the separation of DTZ and Engineering, the Board considered a number of alternatives including a demerger and a sale of DTZ. The Board has concluded that the TPG and PAG Consortium offer to acquire DTZ is in the best interests of the Company and its shareholders,” said Trevor Rowe, chairman of UGL. “The sale price represents a fair valuation for DTZ which the Board believes will deliver significant value to UGL shareholders”.

Recently, Texas-based TPG has made a number of acquisitions, particularly in Australia. The purchase of DTZ follows the firm’s $900m deal for Inghams Enterprises Pty, Australia’s biggest poultry producer in 2013. To date, TPG’s sixth fund, which is focused on Asian markets and has supplied the funds for the DTZ deal, has raised around $2.9bn. TPG hopes that eventually the fund will be able to raise $3.5bn in total. Ontario Teachers’ has also been active in Australia in the recent past. In 2013 the fund, the largest pension fund in Canada’s most populous province, agreed to acquire a 70 percent stake of Leighton Holdings Ltd’s telecommunications assets for around A$620m. In 2010, the fund also agreed to buy the lease for the Sydney Desalination Plant alongside Hastings Funds Management Pty for A$2.3bn. In a separate statement regarding the deal Ben Gray, TPG Capital’s managing partner of Asia, said “We see a great opportunity in commercial real estate services to create a best‐in‐class firm servicing clients on a global basis. We believe DTZ is well progressed on this path, and that together with our co‐investors we can accelerate the evolution of its strong platform.”

By acquiring DTZ, the consortium will be taking on a firm with revenues of A$1.9bn in the 2013 fiscal year. The company employs around 45,000 staff globally, including contractors. DTZ, founded in the UK in 1784, is a provider of property management services in 208 cities across 52 countries. In 2011, UGL bought DTZ for $131.6m, acquiring the company out of a pre-planned period of administration. Following the acquisition, UGL merged DTZ with its own property services business. In the statement announcing the deal, UGL noted that the net proceeds from the sale will be dependent on final capital gains tax assessments and transaction costs, including sale and demerger related costs, and other sale adjustments including certain known liabilities which will be transferred with DTZ. The firm expects net proceeds from the sale to be between A$1.0bn and A$1.05bn following the aforementioned deductions. DTZ’s incumbent chief executive officer, Tod Lickerman, will retain his position in the new consortium owned unit. Former CBRE Group chief executive Brett White will become the unit’s executive chairman in March.

Richard Summerfield