Shares in Downer EDI, the struggling contractor and train builder, had a positive day yesterday as a new CEO was named, the market digested the staged sale of the troubled Century Resources arm; and news that the review of the company business will be announced next February.
That's when the new CEO, Geoff Knox, formerly of BHP and with a solid track record in infrastructure and engineering and construction, will be on board.
The review was outlined at its AGM in November, it's now substantially complete "and a number of key recommendations are being progressed".
Investment bank, UBS is conducting the review. UBS raised cash for Downer in May 2006, several months before the company started its chain of earnings downgrades and operational problems.
DOW said final decisions regarding the review will be announced shortly after Mr Knox commences duties in February.
The market bid the shares up 20c to $5.48 yesterday, a nice gain for a stock that is on most investors' watchlist for its recent history of downgrades and disappointing performance.
Mr Knox will succeed Brent Waldron who was appointed interim CEO in early August when Stephen Gillies departed after the last warning on earnings.
Mr Knox starts on February 1, 2008. He was previously global executive director at Hatchcos Holdings, a large worldwide engineering and infrastructure group.
He is the former president of BHP engineering and vice president of BHP project management. He also worked at companies like NSW coal miners, Costain and White Industries.
Downer EDI chairman Barry O'Callaghan said the board was delighted to have attracted such a highly experienced, globally qualified candidate.
"Geoff Knox brings a diverse career spanning almost three decades across a range of aligned industry sectors with a strong track record in infrastructure, engineering and construction," he said in a statement to the ASX.
Mr O'Callaghan said the board was impressed by Mr Knox's experience in managing businesses in which the critical success factors lie in the disciplines of relationship management, people management, contracting and major project management.
Mr O'Callaghan said the board acknowledged the "outstanding contribution" of Mr Waldron in his role as interim CEO.
"The company has been fortunate to retain the services of such a high calibre individual who has played a pivotal role in implementing major change to the organisation during a particularly challenging period in its history," he said.
Friday saw Downer announce the staged sale of Century Resources, the company's oil, gas and geothermal drilling division, to MB Holding Co of the Middle East. The transaction values the business at US$137.35 million (A$172 million), which is book value at 30 June 2007.
Downer says the sale will occur in two stages. The first will involve the sale to MB Holding of 51% of a new Century holding company (Century) that owns the Century assets and businesses.
Downer EDI will hold the remaining 49% interest. This transaction will be substantially completed by December 17, 2007 and MB Holding will pay Downer EDI US$70.05m for its 51% interest.
Downer said the "balance of Downer EDI's interest in Century will be sold to MB Holding, either at the end of three years under a Downer EDI put option, or earlier should MB Holding elect to exercise a corresponding call option. The price for the remainder of Century will be net assets at the time.
"Downer EDI has guaranteed the EBIT performance of Century until the earlier of MB Holding exercising its call rights over Downer EDI's 49% interest or the exercise of the put option by Downer EDI at the end of the 3 year option period. Actual and budgeted EBIT performance of Century is in line with the guaranteed sum, with any exposure capped at $US5.4 million in any one year.
"The sale will not impact current earnings guidance."
In Friday's statement, acting CEO, Brent Waldron said: "While our intention to sell Century Resources has been flagged for some time our focus has been on structuring a transaction that realises the greatest value for our shareholders and preserves the value of the business during the sale process".
MB Holding is one of the fastest growing and largest oilfield services companies in the Middle East with turnover of approximately US$600 million and total assets in excess of US$660 million.
MB Holding Chairman Mohammed Al-Barwani said: "The acquisition of Century strengthens our presence in the Asia Pacific and positions us well in our overall strategy of becoming a global player providing integrated oil field services".
Brent Waldron stated: "Both parties will benefit from the creation of a partnering arrangement which combines complementary skills and a strong industry presence".
The proceeds will be used to reduce debt and meet other US dollar denominated trade payables. The sale is subject to approval by the Foreign Investment Review Board.
