Macmahon and GBF shake hands on $48m deal

GBF and Orminex joint venture project, the Comet Vale. Image: Orminex

Macmahon Holdings has confirmed that it has made a takeover offer of at least $48 million for GBF Underground Mining.

The engineering contractor has made the deal official after ongoing market speculation in recent weeks. It expects to complete the takeover in mid-August.

Macmahon’s acquisition is consistent with the company’s growth plan to scale up its underground division.

The company will pay $48 million upfront for the purchase, which will be funded by cash and GBF’s finance lease debt, resulting in a small premium on GBF’s net tangible asset value.

Macmahon will also pay two potential earn-out payments worth a combined $53.5 million based on GBF’s performance in the 2020 and 2021 financial years.

The contractor will maintain the GBF brand and company personnel following the transaction. GBF is expected to generate revenue of around $180 million and earnings before interest, taxation, depreciation and amortisation (EBITDA) of $20 million in the 2020 financial year.

When combined, Macmahon and GBF’s underground tender opportunities amount to over $2.3 billion across 11 projects.

Macmahon chief executive officer Michael Finnegan described GBF as a strategically compelling and financially attractive acquisition.

“With GBF we have the opportunity to achieve meaningful scale in our underground contracting business, which is a key pillar in our strategy of becoming a leading mining contractor that can service clients through the life cycle of their mining operations,” Finnegan said.

GBF, a privately owned company since its foundation in 1988, boasts a client base that includes Orminex, Silver Lake Resources, Doray Minerals and Millennium Minerals.

Orminex praised the acquisition, announcing that current GBF co-owner Michael Foulds would join the board of the company following the completion of the Macmahon deal.

Daryl Henthorn, Orminex executive chairman, suggested the addition of Macmahon’s capabilities through the deal would aid the company’s mineral ventures model, which is devoted to sourcing, developing and funding high-grade gold assets.

“We now have the potential to seek to leverage Macmahon’s extensive surface mining capabilities to open up a pipeline of new projects that Orminex can evaluate and pursue under our mineral ventures model,” Henthorn said.

“In addition to our current underground mining operations, we are now able to consider expanding our portfolio to incorporate surface mining, opening up the market for the mineral ventures model.”

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