Leighton nears sale of fiber-optic asset to Ontario Teachers'

SYDNEY/HONG KONG Wed Feb 20, 2013 12:44am EST

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SYDNEY/HONG KONG (Reuters) - Australia's Leighton Holdings Ltd (LEI.AX) said on Wednesday it was in exclusive negotiations to sell 70 percent of its telecommunication assets, including its NextGen Networks fiber-optic business, to Canada's Ontario Teachers' Pension Plan, in a deal valuing the assets at A$885 million ($915.93 million).

Teachers' has been on an aggressive drive into Asia in search of higher returns. Along with many other Western pension plans, Teachers' is actively seeking opportunities for direct investments to increase its profits as it faces the need to provide pensions for ageing populations. Teachers' administers the pensions of 300,000 active and retired teachers in Ontario.

The pension plan also recently emerged as an investor in the latest fund-raising round for China's unlisted online shopping firm, 360buy.

"The sale price is to the up end of what people were thinking the assets might be worth. If (Leighton) does manage to do a deal for that price, that will be a good outcome for the company," said Shane Delphine, an investment manager at Karara Capital in Melbourne.

Delphine also said it was also understandable why Ontario Teachers' only wanted 70 percent of the business.

"Obviously they don't want to operate the assets. They want Leighton to continue to operate the assets" because Leighton still has a number of telecommunications service companies that will be more likely to win business from a 70-30 joint venture than if the assets have been completely sold to a third party.

The $117.1 billion Ontario Teachers' fund, Canada's largest single-profession pension plan, had lined up against Australia's TPG Telecom Ltd (TPM.AX) to bid for Leighton's NextGen business, sources previously told Reuters.

Shares of Leighton, Australia's largest construction company, rose more than 3 percent on the news to reach A$24.21, the highest level in almost a year. TPG Telecom shares fell 11.2 percent to A$2.46.

Leighton said it intends to use cash from the sale to reduce its debt. The firm, controlled by Spain's ACS (ACS.MC), is selling NextGen as well as the Metronode and Infoplex data businesses.

"The sale price represents a compelling value-creating proposition for Leighton Holdings' shareholders," said Leighton CEO Hamish Tyrwhitt.

Teachers' senior vice president for global infrastructure, Stephen Down, recently told The Australian newspaper that Australia was a "really great market to invest in", citing its regulatory regime and openness to foreign direct investment.

Last year, Teachers' acquired a 9.9 percent stake in South Korea's Kyobo Life KYOBO.UL for around $400 million and before that, with Hastings Funds Management, signed a A$2.3 billion ($2.35 billion) deal on the long-term lease of the Sydney Desalination Plant with Australia's New South Wales state.

The pension fund plans to open its first Asia office this year in Hong Kong with as many as 10 staff.

($1 = 0.9662 Australian dollars)

(Editing by Richard Pullin and Matt Driskill)

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