So is the Leighton Holdings associate, Macmahon Holdings bidding for Ausdrill with or without the approval of its very best friend?
Macmahon yesterday launched a paper $446 million takeover bid for Ausdrill (ASL).
Macmahon is offering 1.45 of its own shares for every Ausdrill share, valuing the stock at $2.59 each. ASL shares closed up 14c at $2.09 as the Macmahon (MAH) price slipped 4c to $1.745. That valued Ausdrill at $2.53.
Ausdrill shareholders should wonder at whether Leighton will top its holding to maintain a 15 to 19% stake in Macmahon that it committed to in an agreement late last year (see below), or whether this bid is independent of Leighton.
Macmahon chairman, Dick Carter said in a statement announcing the bid that: "A combined Macmahon and Ausdrill will be able to extend the range of services offered to their combined customer base".
He made no mention of the Leighton relationship in the statement, and yet that’s Macmahon’s largest shareholder.
A merged entity would be a "leading diversified mining contracting and civil construction company", with a market capitalisation of about $1.4 billion, he said.
Macmahon’s approach comes 12 months after Ausdrill revealed it had been "confidentially" approached by a party with assets worth about $2 billion regarding a potential takeover.
"The combination also offers Ausdrill shareholders increased geographic spread and improved commodity diversification through exposure to Macmahon’s significant operations in bulk minerals such as iron ore and coal," Macmahon chief executive Nick Bowen said in a statement.
The offer is subject to a minimum acceptance of 50.1%, so Macmahon is expecting to sit as a majority shareholder, but with a minority rump, at the moment.
Under the Offer, Macmahon said its offer of 1.45 Macmahon shares for each Ausdrill share values Ausdrill at $2.59 per share, or approximately $446 million, and implies a substantial premium of 32.7% based on the closing prices of Macmahon shares and Ausdrill shares on 20 May 2008.
"The Macmahon Board and management believe Macmahon and Ausdrill have highly complementary businesses and customers and the combination will present significant benefits to all shareholders of both companies.
A combination of Macmahon and Ausdrill will:
- Be well positioned to benefit from the attractive outlook in the mining contracting and construction industries in Australia and overseas over the short to medium term;
- Offer increased geographic spread and improved commodity and line of business diversification;
- Capitalise on both Macmahon’s and Ausdrill’s existing blue chip and government customer relationships to extend the range of services offered and be well placed to win further contracts; and
- Have increased equity market scale and a larger balance sheet which will enhance the Combined group’s access to debt and equity capital to fund organic growth as well as to make further value enhancing acquisitions.
“Ausdrill shareholders will also have the opportunity to realise a substantial premium for their Ausdrill shares and at the same time gain exposure to the significant upside offered by the Combined Group.
Macmahon Chairman, Dick Carter, said: “In light of the ongoing consolidation in the mining industry, it is becoming increasingly important for mining service providers to have the scale to maintain their competitive position and to effectively service their customers.
“A combined Macmahon and Ausdrill will be able to extend the range of services offered to their combined customer base. For example, the Combined Group will be able to provide the Macmahon mining customers with exploration services and Ausdrill’s existing customers expanded mining and construction services.”
But Ausdrill shareholders should read this statement from late last year when Macmahon and Leighton announced a settlement, or standstill, to their nasty spat about Leighton’s unwanted advances on Macmahon.
"Leighton Holdings Limited today announced that it had entered into a Memorandum of Understanding (MOU) with Macmahon Holding Limited which formalises a partnering relationship between the two companies. Under the MOU, Leighton will promote Macmahon as a “Partner of Choice” to joint venture on large infrastructure and resources related construction projects. Leighton currently has a 15% shareholding in Macmahon.
Leighton Holdings’ Chief Executive Officer, Mr Wal King, said that he was very pleased with the agreement which he believes represents a good outcome for shareholders of both Leighton and Macmahon.
“We see very strong infrastructure and resources markets in Australia at the moment and the outlook remains very positive. Having a partner of choice relationship with Macmahon increases the Leighton Group’s ability to take on and execute work, while boosting Macmahon’s ability to take on major projects.
“This relationship also gives Macmahon opportunities to participate in projects in regions and industry sectors where it does not currently have a significant presence. It will strengthen Macmahon’s position as a vigorous and expansive competitor in the Australian construction, engineering and contract mining industries,” said Mr King.
Macmahon Holdings’ Chief Executive Officer, Mr Nick Bowen, said that the Company’s expansion into the East Coast has continued to gain momentum and that Macmahon was emerging as a top-tier
