SYDNEY-UGL Limited is pursuing a demerger to create two standalone ASX-listed companies, one focused on global property services, DTZ, and the other on engineering, construction and maintenance services in Australia, New Zealand and Asia, Engineering.

The firm's decision to pursue a demerger follows the completion of the corporate structure review in March. That review included a detailed evaluation of the issues, costs and benefits of various alternatives including maintaining the current corporate structure, industry opportunity, the company's M&A strategy and a structural separation of DTZ and Engineering.

“We believe a demerger will enhance shareholder value over the short and long term and prove beneficial to our clients and our people,” said UGL chairman Trevor Rowe. “Over the past decade, UGL has successfully grown its property services and engineering businesses to become sizeable businesses which are leaders in their respective markets.

“As a result, we believe a demerger is the next logical step which will allow each business to pursue their own strategic priorities and opportunities for growth. The review concluded that a structural separation of DTZ and Engineering via demerger provides the optimal corporate structure for both businesses.

UGL's board of directors believes that a demerger of DTZ and Engineering will maximise long term value for UGL shareholders, Rowe added.

UGL managing director & CEO, Richard Leupen said: “Following the establishment of the global headquarters for DTZ in the United States, UGL is increasingly seeing the benefits of operationally separating DTZ and Engineering. A demerger will recognise the fundamentally different markets, geographic focus and strategic requirements of the two businesses and we believe that further benefits will result from a complete separation.”

DTZ is a leading global integrated property services company with operations in 52 countries, 45,000 people worldwide and annual revenues in excess of $2 billion.

Engineering is a market leader in engineering, construction and maintenance services in Australia, New Zealand and Asia. Engineering has a diversified end-market exposure across rail, resources and infrastructure projects balanced by a leading operations and maintenance capability delivering a material recurring revenue base. The Engineering business employs 8,000 people with annual revenue in excess of $2.3 billion. Following a demerger, Engineering is expected to qualify for inclusion in the S&P/ASX200.

UGL says it will proceed as quickly as possible to prepare DTZ and Engineering to operate on a standalone basis. This will require independent corporate and financial structures to be established across both businesses, including separate Boards of Directors and management teams and separate capital structures and dividend policies. Further, the global integration of DTZ and the build-out of DTZ's global headquarters in the United States will be completed prior to a demerger.

Importantly, UGL will focus on actively reducing gearing over the next 12 to 18 months to ensure once separated, DTZ and Engineering will have sustainable capital structures which will allow each business to achieve their strategic objectives and pursue growth opportunities as they arise.

“While we will proceed as quickly as possible to prepare the businesses for a demerger, during the preparation phase, we will remain focussed on executing the respective growth strategies for each business. It is business as usual for both DTZ and Engineering and we will work to ensure no disruption to clients, employees, suppliers or other stakeholders,” Leupen said.

While the timing of a demerger will be dependent on the timeframe required to prepare DTZ and Engineering to operate on a standalone basis, as well as prevailing market conditions, UGL aims to complete a demerger in FY2015, subject to regulatory and statutory approvals, including shareholder approval.

The DTZ board also agreed to an extension of Leupen's contract for the time required to complete a demerger, Rowe said.