Macmahon fires back at CIMIC, rejects takeover offer

Image: Macmahon Holdings

Mining contractor Macmahon Holdings has labelled the takeover offer it received from CIMIC Group as “inadequate” and “opportunistic”, while advising its shareholders to reject the bid.

Spanish-controlled CIMIC, which already owned 20.54 per cent of Macmahon prior to launching the bid, last month offered 14.5 cents per share for the stock it did not already own, valuing the target at about $175 million.

In response, Macmahon today released its target’s statement, describing the offer as “inadequate” and saying an independent expert concluded that it was “neither fair nor reasonable.”

Perth-based Macmahon added: “The timing of the offer is opportunistic and doesn’t reflect the improved outlook for the mining services sector.”

“Macmahon has significantly improved prospects from its existing contracts and a strong tender pipeline,” the company stated.

Additionally, Macmhaon said shareholders should take no action because CIMIC is not offering enough for the benefits it may receive, and accepting the bid may deprive them of the ability to consider an alternative proposal, if one emerged.

Macmahon also released its half year results to the end of December 2016, reporting revenues of $168.3 million, which resulted in a $5 million net loss after tax from continuing operations.

Chief executive officer Michael Finnegan said Macmahon had now largely resolved its outstanding legacy project issues and was anticipating a significant turnaround in financial performance over the next 18 months.

“Over the past several months, we have been steadily implementing a number of initiatives to lay the foundations for future success, including cost reductions, measures to turnaround performance at Telfer and the termination of operations in Nigeria,” Finnegan said.

“In regards to our existing order book, Macmahon’s revenue from the Tropicana project (in Western Australia) is expected to increase by approximately 25 per cent in the 2017 calendar year, and may increase further from July 2017 2018 if Tropicana’s Long Island expansion proceeds.”

Finnegan added Macmahon’s second largest contract, the Telfer gold project, was expected to start generating monthly profits for the company during the latter part of this year.

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