Downer EDI has suspended the sale process of its mining business due to the “extraordinary market volatility” caused by the coronavirus pandemic.
This move has caused potential buyer Perenti to also drop its interest in acquiring Downer’s mining services division.
Perenti stated that the current period of “market uncertainty and volatility” would not serve shareholders’ best interests.
“We will maintain a watching brief on the situation and do not rule out re-engaging with Downer if market conditions improve,” Perenti group managing director Mark Norwell said.
Downer launched a strategic review of the future of the contract mining business last year, citing it was “very capital-intensive” to the group.
The mining business took up more than 50 per cent of Downer’s capital expenditure to contribute 12 per cent of profit in the 2019 financial year.
Perenti stated it would only put forward an offer to acquire Downer’s mining business if it was aligned with the former’s strategy, warning the market that there was no certainty a transaction would eventuate.
“It is important we maintain discipline around our growth strategy,” Norwell said.
“Creating value for our shareholders is always at the forefront of our thinking and will continue to be as we execute against the initiatives detailed in our 2025 group strategy.”
Perenti’s 2025 strategy zooms in on enhanced earnings, cash conversion and efficient capital management.
Meanwhile, Downer is still continuing the potential sale of its laundries business.
“As we said when we announced the portfolio review, Downer’s mining business is a leader in Australia with a proven track record and it is well positioned to build on its strong market position and pipeline of work,” Downer chief executive Grant Fenn said.