CBRE Group, Inc. (NYSE:CBRE) has announced its plans to combine its project management business with Turner & Townsend, its majority-owned subsidiary. Upon closing the transaction, CBRE will own 70% of the combined Turner & Townsend/CBRE project management business, with the Turner & Townsend partners holding the remaining 30%.
The net revenue of CBRE's entire project management business, including Turner & Townsend, was approximately $3 billion in 2023. Since 2021, the combined net revenue has grown at a double-digit annual rate with an approximately 15% net profit margin. Turner & Townsend has experienced significant growth, with revenue growing at a compound rate of more than 20% since CBRE acquired a 60% ownership interest in November 2021.
The net synergies derived from bringing the two businesses together are expected to generate approximately $0.15 of incremental run-rate core EPS by the end of 2027. The cost of the incremental investment in Turner & Townsend/CBRE project management is approximately $70 million, exclusive of deal costs.
CBRE's Chair and Chief Executive Officer, Bob Sulentic, stated that unifying the project management business will create an offering unmatched for its scale and breadth of capabilities, with more than 20,000 employees serving clients in over 60 countries. He highlighted the growth catalysts for the business, particularly increased spending on infrastructure, green energy, and employee experience.
The combined business will be led by Vincent Clancy, Turner & Townsend’s Chief Executive Officer, who will continue to report to a board controlled by CBRE and comprised of senior executives from both CBRE and Turner & Townsend. The CBRE board of directors intends to appoint Mr. Clancy to the CBRE board upon closing the transaction.
Beginning in 2025, CBRE intends to report project management results in a new segment separate from global workplace solutions to provide increased transparency for investors.
Turner & Townsend operates across three business segments globally: real estate, infrastructure, and energy and natural resources. The transaction is expected to close around year-end, subject to satisfaction of regulatory and other customary conditions and completion of required consultations with employee works councils in certain jurisdictions. The market has reacted to these announcements by moving the company's shares -1.0% to a price of $89.47. Check out the company's full 8-K submission here.
