Leading contractor CIMIC has strongly criticised the recent financial and operational performance of its takeover target, Macmahon Holdings.
Spanish-controlled CIMIC, which launched a 14.5 cents per share takeover for Macmahon last week, issued its first supplementary bidder’s statement for the proposed takeover of the Perth-based mining contractor yesterday.
CIMIC ruthlessly highlighted several aspects of Macmahon’s performance between the 2014 and 2016 financial years in the statement, including a 66 per cent decline in revenue, a 91 per cent decline in earnings before interest and tax (EBIT), a significant fall in profits, an 89 per cent drop in underlying basic earnings per share (EPS), an 87 per cent fall in operating cash flow per share, and a 41 per cent decrease in order book value.
An additional factor that CIMIC said should be considered by shareholders contemplating the bid was that Macmahon has had five chief executive officers, three chief financial officers and two chairmen in the past four years. CIMIC also believes that Macmahon relies too heavily on its Tropicana gold contract for revenue.
CIMIC’s offer, which values Macmahon at about $175 million, represents a premium of 31.8 per cent on the target’s value on the ASX on January 23, the day prior to the bid being made. CIMIC was already Macmahon’s majority shareholder before making the offer with a 20.5 per cent interest.
Macmahon last week rejected the offer from CIMIC because “it does not represent fair value” for the company.
Advising shareholders to take no action, Macmahon responded that the offer value was less than the company’s current NTA (net tangible asset) per share. It added that the company also has a robust balance sheet with minimal debt and strong prospects at its Tropicana and Telfer prospects in Western Australia.