Lend Lease Plans to Buy B&B Communities

Submitted by Craig Strzelecki on 30 June, 2008 - 12:31

Lend Lease plans to expand its business in retirement homes. As Australia's population is moving quickly into the grey region, the company sees growth prospects in the business. It plans to takeover Babcock and Brown's listed funds to break away B&B Communities (BBC) from its parent company. Lend Lease was listed as one of the prospective buyers of 6.18 percent substantial stake for Babcock and Brown Communities, which owns substantial number of retirement homes and aged-care facilities. However, it would have to pay $50 million fee to break away Babcock and Brown from its parent company.

According to Lend Lease Chief, Greg Clarke, the company has a "cashed up" balance sheet and is quite serious about expansion into retirement homes and villages, which looked like very prospective business propositions. It has already offered $1.3billlion cash and share offer at a price of $5 per share to FKP. The offer was rejected by FKP but Lend Lease plans to come back with a fresh price for the take over.

Lend Lease books are strong enough to buy BBC market value of $320 million and still make a fresh offer to FKP for a possible take over. Moreover, takeover of BBC would lend an added leverage to Lend Lease as it would be in a position to offer management of bigger portfolio of retirement homes and aged-care facilities.

If Lend Lease is able to buy B&B Communities as well as FKP then it would capture 20 percent market share. FKP currently holds interests in 9922 units in Australia and approximately 3000 retirement villages in New Zealand. Babcock and Brown Communities has 4158 retirement villages in Australia and about 1000 across Tasmania. BBC also manages further 4810 units in Australia. Lend Lease itself owns 2258 units and a takeover of both the companies would clearly make it as a market leader. The rest of the market segment remains fragment and its nearest competitor would be AMP which holds 3 percent market share.

BBC currently has a 10 year management agreement with its parent company which may pose a problem of smooth take over of the company by Lend Lease. The agreement may prove to be a hurdle to Lend Lease to occupy the stakes.