By Rishav Chatterjee and Ayushman Ojha
(Reuters) - Australian developer Lendlease will retreat from its overseas construction businesses and free up to A$4.5 billion ($2.9 billion) in capital for shareholders, putting a lid on its international ambitions to shift focus on local operations.
Lendlease will form a new capital release unit (CRU), it said in a statement on Monday, with an aim to recycle the A$4.5 billion by finishing transactions that are underway.
The construction company said it was targeting A$125 million in annual savings within 12 months, and the return of A$500 million to shareholders through an on-market buyback plan.
Lendlease recently faced a lot of backlash from its shareholders who have in the past pressurised the firm to pivot its focus towards Australian operations, resulting in its most notable change since selling the wealth management business to National Australia Bank (OTC:NABZY).
Shares of Lendlease rose nearly 10%, set for their best day since April 2020, if gains hold.
"The strategy announcement is addressing key investor concerns around the unprofitability of offshore while proposing an orderly exit," UBS analysts said in a note.
Lendlease will book impairments of up to A$1.48 billion, write down investments in its overseas projects, but maintained its outlook for return on group equity for fiscal 2024.
"We recognise that our security price performance and security holder returns have been poor as we have faced structural challenges and a prolonged market downturn," said Lendlease Chairman Michael Ullmer.
Still, the company will retain its investments platform in the international markets, CEO Tony Lombardo said, as it looks to grow funds that it manages.
($1 = 1.5078 Australian dollars)