Leighton Holdings has pushed out chief executive Wal King after 23 years, promoting another company veteran into the top job.
Leighton, majority owned by German construction group Hochtief, this afternoon said David Stewart, currently co-chief operating officer, will take over on January 1, 2011.
Mr King, 65, will stay on as a consultant to the company.
Shares in Leighton rose 97 cents, or 2.9 per cent, to close at $34.34. The shares hardly reacted to the widely expected announcement, but were buoyed by news that Leighton subsidiary John Holland Group landed a $276 million deal for a new port in Western Australia.
Wal KingCredit: Erin Jonasson
Leighton chairman David Mortimer said Mr King had made an extraordinary contribution to the company during his 42-year career.
‘‘During Wal’s leadership, Leighton has risen from being a middle ranking Australian construction company to a global leader as a contractor and the world’s largest contract miner,’’ Mr Mortimer said in a statement.
Mr King's fate has been played out in the media over the last several months, with speculation that Hochtief was pushing for him to retire. At Leighton's results in August, Mr King declined to comment on his future.
The company was forced to issue a statement in August saying detailed succession planning had been underway for the past two years. Independent directors were quoted in the media last week saying it would be best if Mr King retired gracefully.
Succession spat
Mr Stewart's appointment will defuse boardroom tensions as he has a good relationship with the group's major shareholder, Hochtief, and the rest of the board.
His appointment will send a strong signal of unification in the company, which has been split in recent months over succession issues relating to its long-serving boss.
The race for a successor was between Mr Stewart and David Saxelby, who runs the Leighton subsidiary Thiess. Both men are similar ages and studied engineering at the same university but Mr Stewart's current role as chief operating officer made him better placed.
Succession has been a hot topic for Leighton because the concern was if the board managed it badly and Mr King walked, the share price would tank - and so would Hochtief's.
Mr King is considered one of the most successful chief executives in the country after taking the business from a market capitalisation of $70 million when he took the helm and turning it into the world's biggest mining contractor, with a market cap of $9.2 billion.
Last year Mr King was named as Australia’s highest paid chief executive, earning a total salary of $12.6 million.
He has been a dominant chief executive and it will be hard for him to let go.
But the toxic relationship between Mr King and Hochtief, which was exacerbated earlier this earlier when Hochtief, which has four seats on the Leighton board, approached Mr King with a proposal to merge Leighton and Hochtief.
Underperforming shares
Mr Stewart comes in at a time when Leighton's shares have been underperforming the market, due to uncertainty surrounding one of its biggest mining contracts, at BHP Billiton's iron ore mines in Western Australia, the impact of a planned new mining tax, and troubled projects in the Middle East.
The BHP Billiton contract could come under review if BHP goes ahead with a planned iron ore joint venture with Rio Tinto and moves toward Rio's practice of using its own workers, rather than contractors at its mines.
A Leighton investor said Mr Stewart, 57, was a reasonable choice to replace King.
"He's competent. He probably just doesn't have the market presence," said Jason Beddow, chief executive of Argo Investments, which owns Leighton shares.
"He's got a good handle on operations. You need an operational person running a contracting business," he said, ahead of Mr Stewart's appointment.