Independent directors of Macmahon have recommended shareholders vote in favour of the proposed sale to Leighton Holdings, concluding they will be better off if the transaction proceeds.
The construction company announced a general meeting will be held on February 26.
Macmahon entered into an Asset Purchase Agreement (APA) on Christmas Eve with Leighton, who is already the majority shareholder in the company.
In a statement released today, the company said “the proposed transaction is in the best interests of Macmahon’s shareholders”.
Ernst & Young in its independent report have concurred, stating “the proposed transaction is not fair but reasonable”.
The assessment that the deal is “not fair” is based on a difference of $1.4 million, which Macmahon said was “comparatively small relative to the market capitalisation” of the company and the potential costs incurred if the sale was not completed.
“Macmahon’s shareholders are likely to be better off if the proposed transaction proceeds,” Ernst & Young stated.
The sale of the construction division will see Macmahon become a dedicated full-service mining contractor, and will provide certainty as the company pursues this strategy Macmahon chairman Ken Scott-Mackenzie said.
“The proposed transaction with Leighton allows Macmahon to focus on pursuing our strategy of growing and developing our successful mining operations, in line with our new strategic direction,” Scott-Mackenzie said.
“Our construction business was not positioned to be competitive or deliver sustainable earnings in the future due to its insufficient scale, high overheads, and challenges in attracting and retaining key management personnel.
“By selling the majority of our construction projects, we will be able to focus on building the strength and reputation of our mining operations, which reduced our risk profile and is expected to deliver more consistent and sustainable earnings,” he said.
The sale process between Macmahon and Leighton has not been without controversy.
Recent bids from another player, Singaporean based construction company, Sembawang erupted in a tit-for-tat war of words, Australian Mining reported.
Sembawang alleged it had made offers to Macmahon prior to Leighton’s bid.
But the subsequent signing of a Memorandum of Understanding and APA with Leighton Holdings meant Macmahon could not grant due diligence access to Sembawang.
“I would encourage shareholders not to be distracted by the recent approaches from Sembawang in relation to our construction business,” Scott-Mackenzie said on the Sembawang issue.
“The independent directors gave thorough consideration to the Sembawang approaches and unanimously rejected them upon considering all aspects of their proposals,” he said.
Macmahon said the rejection was based on the limited information provided by Semawang, and the conditional nature and overall uncertainty of their proposals.
“To walk away from the certainty of the transaction with Leighton in the hope of doing a better deal with Sembawang based on a highly conditional, indicative proposal is an unacceptable rick which is considered not to be in the best interests of our shareholder.
“The actions of Sembawang to date certainly discourage any such leap of faith.”