The West

Leighton receivables discounted and tilt fair

The independent expert called in to assess the merits of Hochtief's bid to increase its control of Leighton Holdings has warned the contracting giant may have to forfeit $300 million in outstanding receipts from high-profile construction jobs.

The warning, by KPMG, coincided with Leighton's board admitting to investors yesterday it had made no "material" progress to cut the size of receivables that at December 31 stood at $5.1 billion.

In its report, commissioned to asses Hochtief's $22.50 a share proportional takeover bid, KPMG said it had applied a $200 million to $300 million discount to the carrying value of Leighton's receivables because of "inherent uncertainty associated with achieving negotiated settlements" on a raft of outstanding contracts. Leighton's big exposure to Chevron's $US54 billion Gorgon LNG development on Barrow Island has contributed to the high level of receivables because of talks between client and contractor over overruns.

At December 31, Leighton's work on the Chevron-led Gorgon LNG development had a contract value of $3.9 billion (including subsidiaries Leighton Contractors and John Holland) although there is industry talk of significant cost blowouts, particularly on work to build Gorgon's jetty.

Hochtief, which is owned by Spanish construction giant ACS, wants to buy three of eight shares held by Leighton's minority shareholders to increase its stake from 58.9 per cent to 74.2 per cent.

KPMG declared Hochtief's bid fair and reasonable, arguing it fell within the expert's Leighton valuation of $22.01 and $24.24.

The West Australian

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