Takeover target Macmahon (MAH) has found a friend in Indonesia and will use this relationship to try and escape the unwanted clutches of CIMIC (CIM) (the old Leightons).
Macmahon shares jumped sharply yesterday following a non-binding heads of agreement with Indonesian miner PT Amman Mineral Nusa Tenggara (AMNT), jumping more than 17% at one stage before ending at 16.5 cents, up 10%.
That’s well above the 14.5 cents first and final offer from the Spanish-controlled CIMIC.
Under the agreement, Macmahon will acquire some assets from AMNT, and AMNT will become a significant shareholder in Macmahon, dealing a major blow to CIMIC’s hostile play for the mining contractor.
As part of this new relationship, Macmahon gets a life-of-mine mining services contract at AMNT’s Batu Hijau operation in Indonesia, a copper and gold project formerly owned by US gold major Newmont and Japan’s Sumitomo Corporation.
The contract would be significantly larger than its current biggest contract at AngloGold Ashanti’s Tropicana mine in Western Australia.
AMNT owns the mining fleet at Batu Hijau but it is understood it would sell this to Macmahon in exchange for shares in the company. Macmahon will acquire about $US150 million in assets from AMNT, including loading equipment, trucks, ancillary and support assets, and usable inventory. In consideration for the acquisition of the assets, Macmahon will issue AMNT with about 959.6 million new Macmahon shares, equal to about 44.4% of the company.
That looks like a way of getting round the shareholder restrictions and will have to run the scrutiny of FIRB and ASIC.
The Indonesian deal comes three days after rejected a takeover offer from construction giant CIMIC, which owns a 23.3% stake in the company, as inadequate and opportunistic. The fact that Macmahon reported a $30 million loss hasn’t worried the Indonesian company.
CIMIC issued its final and unconditional bid for Macmahon in January at that 14.5 cents a share price. Since then it has only marginally increased its stake to 23.34% earlier this week.
CIMIC can’t lift its bid because it said in its initial statement that the 14.5 cents a share offer was final, meaning it could very well be stranded with what ever shareholding it gets from its bid (unless it can return the shares to accepting holders).
Macmahon said the proposed deal with AMNT could be transformational and deliver substantial value to shareholders by increasing Macmahon’s scale, operational diversity, revenue, profitability and growth prospects. Macmahon directors would say that seeing this deal could see them escape the claws of CIMIC.
CIMIC said yesterday the proposed deal between Macmahon and AMNT posed risks for MacMahon shareholders. CIMIC said Macmahon’s proposed AMNT deal was “uncertain and dilutive” for Macmahon shareholders, and “significantly increases” the company’s risk profile – not to mention CIMIC.
“Macmahon is asking its shareholders to take the risk – to hope for improved outcomes in the future and back a potential proposal which will dilute existing shareholders – without adequate evidence that it can deliver on either of these outcomes,” CIMIC said.
The deal will water down the CIMIC stake by 40%, reducing its current stake to around 13%, assuming no more acceptances.
The AMNT deal has to be approved by Macmahon shareholders, giving CIMIC a chance to defeat the placement and fleet deal. But can it vote its shares seeing it has an interest in the transaction by way of its unconditional bid.
Sounds like a good one for the lawyers and for ASIC to sort out, and perhaps some court action as a bonus?
