£20m White City exit for Multiplex

Westifeld sweetens pill as it takes over contractor's work and staff at west London site.

Multiplex has handed over the White City project in west London and all its personnel to Westfield, the developer, for £20m in what is being painted as an amicable parting of the ways.

All the construction work will now be done by Westfield using the transferred Multiplex management team. A spokesman said it hoped to retain the ex-Multiplex White City staff once their work for Westfield is complete.

The £20m figure was based on the fact that Multiplex had two years to run on its £800m, four-year contract for which its margin was 5%.

The two Australian companies had been at odds over major changes to the retail and leisure complex project, which are rumoured to have increased costs by up to £100m. Westfield prefers to act as both developer and builder on its projects and is believed to have been uncomfortable at the restrictions imposed on it by having an outside construction partner.

Originally Multiplex secured the design and build contract in 2004 for a fixed fee of £600m for owner Chelsfield.

Westfield acquired a 25% stake in the White City shopping centre in autumn 2004, when it took over Chelsfield. Last year it doubled that stake with the acquisition of a further 25% from Multiplex and the Reuben brothers. At one stage there were fears that the wrangle would end up in court, although both sides denied it, claiming they would only go to arbitration if they had to.

White City combines 200,000m² of retail outlets, a 13,000m² leisure complex and parking for 4,500 cars.

* Multiplex confirmed that its losses on its troubled Wembley stadium contract amounted to £147m in its interim results to the Australian Stock Exchange last week.

The construction division was only able to claw back some of the money through gains elsewhere and ended with a pre-tax loss of £129m on a construction turnover down slightly at £998m. Overall the group's turnover dropped 4% to £1.3bn generating a post-tax profit of £88m.

Multiplex said it remains committed to working in the UK, but that it will restrict its construction activities to in-house work generated by its developer activities.

[Contract Journal, 23 August 2006, p 1]