Spanish-controlled CIMIC (CIM) (formerly Leighton Holdings) is continuing its takeover spending spree with the construction group making an unconditional takeover bid for mining services company Macmahon Holdings (MAH).
The bid comes a month after it completed the acquisition of engineering and maintenance firm UGL in December. Through its Leighton Holdings antecedents, CIMIC owns 20.5% of Mcmahon and is offering 14.5 cents per share for the rest – funding the deal through a combination of available funds and existing debt facilities.
That values the company at $174 million and represents a 32% premium on the stock price prior to the bid announcement. CIMIC, which is 72.5 per cent owned by Spain’s ACS Group (via Hochtief of Germany), said in a statement it had received Foreign Investment Review Board approval for the bid and that the competition watchdog had no concerns. It plans to delist Macmahon, as it did UGL, if it gets a large enough stake.
Macmahon directors told non CIMIC shareholders to do nothing until they have assessed the ‘final’ offer from CIMIC (meaning it won’t be increased).
CIMIC said it would, if successful, conduct a strategic review of Macmahon and aim to find a new position for any employee whose role is deemed surplus to requirements.
CIMIC shares were up 1.1%, at $34.50, while Macmahon shares were up 32%, at 14.5 cents (punters having concluded there won’t be a counter offer).
Analysts point out that what CIMIC is doing with its bids is buying new business in the shape of the order books of UGL and Macmahon.
Citi analyst Simon Thackray said he wasn’t surprised by the acquisition, noting an absence of the usual level of year end contract announcements.
"M&A ahead of the FY16 result on February 8 is not altogether unsurprising to us on expectations that work was harder to find for CIMIC in 2016 than in 2015."
That’s because of the continued unwinding of the resources boom and the relative scarcity of new infrastructure contracts from governments other than NSW and Victoria.
