Australian services giant UGL has until 6 December to make a formal proposal to rescue embattled DTZ.
DTZ confirmed this week that it is in exclusive talks with the acquisitive Antipodean company three weeks after the collapse of negotiations with 55% shareholder Saint George Participations in partnership with BNP Paribas.
On Tuesday, when it named UGL as its preferred bidder, DTZ repeated that any deal would only attribute a “minimal value, if any” to the company’s shares.
This announcement, first made on Monday before any bidder was named, had sent the company’s shares into a tailspin, reducing its market capitalisation to less than £7m.
Confirmation of talks with UGL was enough for shares to rally from a low of 2.4p to settle above the 3p mark on Thursday.
Although there is no certainty that any deal will be done, DTZ chief executive John Forrester said the proposed takeover had “the absolute support of the respective boards of both sides”.
He added: “We will have one of the best balance sheets in the sector and low levels of gearing. That is why it is so compelling. I couldn’t be more excited about the business platform this gives clients and staff.”
Forrester’s role in a combined company and whether DTZ would keep its name also form part of ongoing negotiations.
The heavily indebted firm’s main lender, Royal Bank of Scotland, is reported to have urged DTZ in recent weeks to launch a formal sales auction and threatened to use a pre-pack administration to ensure the deal is backed by SGP.
? The share price of loss-making Colliers International sank to 2.38p as Estates Gazette went to press on Thursday. The firm said it knew of “no reason” for the fall “beyond the effect of the statements made by DTZ”.
UGL: From construction to property management
Australian support services group UGL has come a long way since it began life as a construction company in Perth in the 1970s.
The A$2.16bn (£1.4m) multinational firm has diversified through acquisitions into an outsourcing, natural resources and property management group.
While the group is led by chief executive Richard Leupen, it is former DTZ man Robert Shibuya who heads the property business as group president of UGL Services.
Shibuya joined Australian-listed UGL earlier this year following a one-year, client-side stint leading a western regions expansion for New York investment company EMMES.
He has 28 years’ experience in the property industry – three years as chief operating officer of DTZ’s North America business, and time spent as global head of corporate advisory services for Trammell Crow.
The takeover of DTZ would add 5,000 staff to his division, which in 2002 bought Knight Frank Price Waterhouse in Australia.
It could also make UGL Services the most profitable in the group. It currently generates the most revenue at A$1.3bn, or 29%, but only A$76.5m, or 27%, of earnings before interest and tax, behind UGL Rail and UGL Infrastructure on 29%.
Global operation: what the new company would look like
The amalgamation of UGL and DTZ could create a £1.2bn property services giant.
The addition of DTZ’s £340m of turnover to UGL would also give the firm the fourth largest share of the property market by revenue. Cushman & Wakefield currently holds fourth position with revenue of £1.1bn.
The takeover of DTZ would give the merged company a presence in almost 30 countries across the world, with DTZ introducing UGL to the UK, Ireland and Europe, including Russia.
DTZ would regain an interest in the US and add Mexico and New Zealand bases to its potential coverage.
UGL claims that it is the most recommended corporate real estate firm in its markets, with 72% of clients saying they would recommend the firm. Just 19% of those surveyed said they would recommend DTZ.
bridget.oconnell@estatesgazette.com
