Leighton ready to pounce on Transfield Construction

Speculation has mounted that Australia's largest contractor, which also owns Thiess, will announce within days that it has acquired Transfield Construction, owned by the Belgiorno-Nettis family.

The acquisition will not include the publicly listed Transfield Services, nor Transfield's stake in the Perisher Blue ski resort and the Sydney Harbour Tunnel.

Talk of the deal comes just weeks after Leighton subsidiary John Holland said it hoped to complete due diligence on the Walter Construction Group by the end of the year.

It is believed both deals will cost about $40 million.

Estimations of the value of work in hand range from $500 million to $700 million for Transfield, $850 million at Walter and $9.3 billion at Leighton.

More significantly, both acquisitions will result in the removal of two of Leighton's competitors, as rival construction firms jockey for the anticipated boom in non-residential and infrastructure construction, which is expected to last until 2006.

``If there were any such deal it will be looked at very closely," ACCC chairman Allan Fels said yesterday.

Both Transfield and Leighton, however, have played down the takeover talk.

``I've heard those rumours, too," a Transfield spokesman said. Yet Transfield has confirmed a leaflet was circulated to its staff two weeks ago stating that the company was still in talks with Leighton.

``There's been no outcome yet," the spokesman said. ``I guess the rumours are being put around by our competitors."

If the deal proceeds, Leighton's main competitors will include Bovis Lend Lease, Baulderstone Hornibrook, Abigroup and Multiplex.

Leighton declined to discuss how far negotiations had progressed. ``It's a bit out of the blue for me," a Leighton spokesman said. ``I can't confirm anything I'm afraid."

Speculation has also surfaced over the past month that Leighton may consider taking over Perth-based Clough Engineering, whose share price has barely recovered since it issued a profit warning last month.

With Leighton already eyeing the lucrative oil and gas projects on the North-West Shelf, some analysts speculate that Clough could be an excellent opportunity for Leighton to leapfrog into oil and gas, where it has relatively little expertise.

Acquisitions aside, analysts say another ace up Leighton's sleeve is its healthy cash position in relation to other contractors, many of which are still struggling to turn a profit after the post-Olympic building downturn.

Leighton had $588 million in the bank at the end of 2001-02.

The cash gives Leighton more scope to secure tenders by taking equity stakes in projects and selling them on completion.

``To play in this game you need pretty deep pockets and Leighton Holdings is clubbing everyone on the head with their balance sheet," one analyst said.

Abigroup, in contrast, had $22.9 million cash at the end of 2001-02.

Leighton rose 14c to $9.39.