January 14, 2016 / 1:10 PM / 4 years ago

Germany's Bilfinger contemplates break-up

FRANKFURT (Reuters) - German engineering and services company Bilfinger (GBFG.DE) is considering selling its most profitable businesses, raising the prospect of investors getting a return from the struggling group but leaving it dependent on a volatile energy market.

The logo of German industrial services provider Bilfinger is pictured on top of their headquarters in Mannheim January 21, 2013. REUTERS/Lisi Niesner

Under new management installed by activist investor Cevian, Bilfinger issued an unexpected midnight statement saying it had hired advisers to review unsolicited offers of interest for its building, facility services and real estate divisions.

The company said it had not yet decided whether to sell the divisions, which together have annual sales of about 2.4 billion euros ($2.6 billion), or more than a third of the group’s total.

A sale would leave Bilfinger, once a revered name in German civil engineering, with just its industrial plant servicing business, which is highly exposed to the oil and gas market and has been hit hard by low energy prices.

UBS analysts, who rate Bilfinger “neutral”, estimated the value of the businesses that may be sold at 1.66 billion euros including debt.

Bilfinger’s market capitalization is 1.84 billion euros and it also has pension liabilities and debt of about 800 million.

DZ Bank analyst Thorsten Reigbar, who has a “buy” rating on Bilfinger, wrote: “The news might raise hopes that Bilfinger’s individual sum of the parts might have a higher value than the current market cap.”

But Bankhaus Lampe analyst Marc Gabriel pointed out the potential pitfalls. “If it sells its only pearl, the only thing left will be a non-growing industrial services business,” he wrote in a note, reiterating his “sell” rating on the stock.

The company did not name the parties who had expressed interest in the building, facility and real estate divisions.

Its major competitors in the area are Johnson Controls (JCI.N), Strabag (STRV.VI), Wisag, CBRE CBG.N, Zueblin (ZUBN.S), Savills (SVS.L) and Hans Huber.

Bilfinger’s shares traded 0.3 percent higher at 40.14 euros by 1230 GMT, outperforming a 1.9 percent weaker German mid-cap index .MDAXI.


Bilfinger in its heyday built the Sydney Opera House and the Munich Olympic stadium, but it shed most of its construction operations in pursuit of higher-margin services businesses after a strategy shift in the early 2000s.

The strategy turned sour, however, as many of Bilfinger’s service contracts were with utilities and petrochemicals customers who cut back sharply on investments, hit by a switch to renewable energy and plunging oil prices.

Bilfinger warned on profits six times between the summers of 2014 and 2015 as the situation deteriorated rapidly. That prompted 26-percent shareholder Cevian to install a new chairman, its second board member, and then a new chief executive and finance chief.

Cevian, which has a policy of buying stakes in companies whose parts it sees as being more valuable than the whole, has sunk more than 600 million euros into Bilfinger since it began acquiring shares in 2011, according to Reuters calculations. Its stake is currently worth about 471 million euros.

CEO Per Utnegaard, who took over last June, said in October he would build the group on the twin pillars of Industrial - the industrial plant-services business - and Building and Facility.

“A decision on... a potential adjustment of the two-pillar strategy which may be required thereby has not been taken,” Bilfinger said in its announcement on Wednesday night.

Utnegaard has already put Bilfinger’s power plant servicing unit up for sale, a deal he hopes to conclude by mid-year.

Bilfinger is also in talks with German private equity group Triton over the sale of its Water Technologies division, the remaining part of Building and Facility, for roughly 200 million euros, people familiar with that deal said.

Deutsche Bank is advising Bilfinger on the Power unit sale. Two people familiar with the matter said it was also the adviser reviewing the current bids.

Additional reporting by Arno Schuetze and Ilona Wissenbach; Editing by Keith Weir

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