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Bilfinger completes break-up with 1.2 billion euros real-estate unit sale: Reuters

Germany’s Bilfinger has agreed to sell its real estate services unit to private equity group EQT for 1.2 billion euros ($1.3 billion), leaving the former major German construction group focused solely on industrial plant services.

The loss-making company has seen half a dozen profit warnings and four chief executives in the past two years as it struggled to reinvent itself, increasing the influence of 26 percent owner and activist shareholder Cevian.

“We have brought Bilfinger to a point where we can be more flexible and agile,” acting CEO Axel Salzmann told reporters on Thursday.

Shares in Bilfinger were up as much as 8.2 percent at a three-month high after the company’s statement, which confirmed what sources familiar with the matter previously told Reuters.

Bilfinger said it would plough most of the proceeds of up to 900 million euros back into its remaining business, although final investment decisions would have to wait for the arrival of new CEO Thomas Blades, expected in the third quarter.

UBS analysts said the price for the Building and Facility unit, which gives Bilfinger an enterprise value of 1.4 billion euros, was in line with its expectations. It values the business at 11 times 2016 operating earnings (EBITA).

EQT said it would invest in the business and aimed to make it Europe’s top real estate services firm.

Bilfinger gave up its attempt to sell the power-plant services business it put up for sale almost a year ago, saying it would try to sell parts and restructure others, and would re-include it in what it reports as continuing operations.

Bilfinger’s last CEO said he would rebuild Bilfinger on the twin pillars of Industrial and Building and Facility. He quit in April, three months after the company said it was reviewing unsolicited offers for Building and Facility.


German construction union IG-BAU and metalworkers’ union IG Metall jointly condemned the sale.

“We have long warned that the once proud Bilfinger group will not find a coherent path under management that acts chaotically. The sale … is another warning signal,” said IG-BAU deputy chief Dietmar Schaefers.

Bilfinger is now a shadow of its former self, having built landmark structures like the Munich Olympic stadium in the 1960s and 70s when it was still a household name.

To raise profit margins, it began moving out of construction and buying up service providers in the 2000s, but in the past few years its core customer sectors ran into trouble – first utilities, then oil and gas and petrochemicals.

As business dried up, structural weaknesses were exposed. A succession of managers including ex-Hesse state premier Roland Koch tried in vain to gain control of what had become a sprawling empire of autonomous service companies.
The real-estate services business whose sale was agreed on Thursday was the most profitable business left.

“The supervisory board stands clearly behind management’s decision to sell Building and Facility,” Chairman Eckhard Cordes, a Cevian partner, said in a statement, adding that Cevian would support new CEO Blades’s investment plans.

The new core business, Industrial, provides plant services for industries such as chemicals and energy. It had 3.65 billion euros of output last year – a measure used in the construction industry of work done in the period – and core profit of 128 million. It employs 30,000 people.

Deutsche Bank and Bank of America Merrill Lynch advised Bilfinger on the sale. Goldman Sachs advised EQT and Citigroup advised Bilfinger’s supervisory board.