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CIMIC shares on watch after buying Broadspectrum for $485 million

The CIMIC Group Ltd (ASX: CIM) share price could be on the move today following an after-hours announcement on Monday.

What did CIMIC announce?

Late on Monday CIMIC announced that its infrastructure services business, Ventia, has added to its portfolio.

According to the release, Ventia has signed an agreement with Ferrovial S.A. to purchase Broadspectrum for an equity value of A$485 million. This remains subject to standard conditions and regulatory approvals.

Ventia has fully committed financing for the transaction through existing funding and acquisition debt finance.

What is Broadspectrum?

Broadspectrum, which was previously known as Transfield Services, is an Australian services company which was founded in Australia in 1956. Whereas, CIMIC’s Ventia business combines more than 30 years of industry knowledge and was created by the merger of Leighton Contractors Services, Thiess Services and Visionstream in 2015.

The combined group is expected to generate revenue in excess of A$5 billion.

Ventia’s executive chairman, David Moffatt, said: “Ventia and Broadspectrum are complementary infrastructure services businesses offering a variety of operational and maintenance services, to a wide range of private sector and government clients and their customers.”

Ignacio Madridejos, CEO of Ferrovial, added: “Crystallizing this deal represents progress in Ferrovial’s strategic focus on developing sustainable infrastructure. New technologies, changes in citizens’ habits and the demands of society make it necessary to adopt this focus in order to continue creating value for our shareholders, our stakeholders and the communities in which we operate.”

Why is Ferrovial selling?

At the end of 2018 Ferrovial classified all its Services businesses as available for sale.

This decision was the result of an overall strategic review of all the businesses aimed at focusing the company’s future on the development of infrastructure, the prime source of value and returns for its shareholders.

The sale of Broadspectrum is the first milestone in that process. The divestment of the other Ferrovial Services businesses (including those in Spain, the United Kingdom and International) is ongoing.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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