Thiess is Leighton’s mining and services subsidiary. Silcar has been a 50/50 joint venture between Thiess and German engineering and electrical giant Siemens.
In a statement to the ASX Leighton said the acquisition of Siemens shares by Thiess was agreed so that “both companies could better focus their respective strategic portfolios.”
Leighton Managing Director Bruce Munro said “This acquisition broadens our services offering to our valued Thiess and Silcar clients and positions Thiess as one of the leading services companies in Australia.”
What the ASX statement did not say was more interesting. Reports have emerged that Silcar's CEO Pat Burke fired eight senior managers from the business last week after millions of dollars in losses from its NBN contracts.
The Australian newspaper said Silcar could be facing losses of up to $60 million on its NBN contracts, which are running late and over budget. It also said that Silcar may be looking to ‘opt out’ of its NBN contracts.
There has been serious management upheaval at Silcar in recent months. Burke is acting in the role of CEO while the company searches for a replacement for Peter Lamell, who left in May. Many other senior executives have also left since Lamell’s departure.
Winning an NBN construction contract has come to be something of a poisoned chalice. NBN contractor Syntheo, a 50/50 joint venture between Lend Lease and Service Stream, is in serious trouble. Service Stream wants out and has suspended its shares on the ASX. It has twice extended the trading halt, and will now not trade until it releases its results in August.
Those results will not make pleasant reading. Syntheo’s NBN contracts represent around half of Service Stream’s revenue, which was $592 million last year. The company borrowed $140 million from ANZ and Westpac in April 2012 to help fund Syntheo’s NBN construction. Its contracts for NBN construction had a potential value of $341 million over three years. Now the Northern territory contract has been ended, with NBN Co itself managing the rollout, and the South Australian work has been cut back.
Silcar has contracts to install the NBN in the ACT and in regional areas of NSW and Queensland. The contracts are worth $380 million over two years, with the option of a further two years at an additional value of $740 million. It is also losing money on the deal.
It looks like things will get worse at Silcar before they get better. Siemens is no doubt glad to see the back of it.