AVJennings to sell contract building division
AVJennings Limited (AVJ) said it has entered into a conditional contract to sell its contract building division to the Japanese listed company, Sekisui House Limited. The Australian residential development company said the arrangement would also see the two companies form an alliance around land and the use of the AVJennings brand, ownership of which would remain with AVJennings Limited.
AVJennings said it would receive payments under the arrangements equivalent to the net asset value of the business on the completion date.
“This is anticipated to result in AVJennings receiving payments of approximately $18.5 million at completion,” the company said.
“AVJennings will retain ownership of the AVJennings brand and continue to use this brand for its developments operations.”
AVJennings said it would also license to Sekisui House the ‘AVJennings’ brand and associated trademarks for use in the contract building business in return for a cash royalty based on the revenue and profit of the business for an initial three-year term.
Chief executive, Peter Summers, said the approach was initiated by Sekisui House and that the company had not been looking to sell its contract building division.
However, Mr Summers said that whilst the last 12 months had seen considerable improved performance in AVJennings’ contract building division, continued improvement would require additional resources to be invested in it.
“AVJennings returned to profit in the first half of this financial year and we believe this realignment of our core business will further allow the company to grow its integrated housing model and focus its time and capital on land based operations into the future, which are the main profit drivers for the company,” Mr Summers said.
He added that the terms of the sale would provide for an ongoing alliance with Sekisui House.
The transaction remains conditional on the approval of the Foreign Investment Review Board and other regulatory approvals, and subject to obtaining these approvals, is expected to settle on or around 31 July 2010.
As at 1044 AEST, AVJennings shares were unchanged at 41c.
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