Mining contractor Macmahon Holdings has dismissed a takeover bid made for the company by CIMIC Group because “it does not represent fair value”.
CIMIC, which already owned 20.5 per cent of Macmahon prior to the offer, launched the bid on Tuesday, offering 14.5 cents per share for the stock it did not already own.
Perth-based Macmahon provided several factors for why its shareholders should take no action in response to the bid, including that the offer price, which valued the company at about $175 million, was less than its current NTA (net tangible asset) per share.
Macmahon added that it has a robust balance sheet with minimal debt, the improved resources industry outlook, and the strong prospects at its Tropicana and Telfer contracts in WA as other reasons why the deal should not be accepted.
In an ASX announcement, Macmahon said it had completed an initial assessment of the offer and CIMIC’s bidder statement.
“On the basis of this initial assessment, Macmahon’s board strongly advises shareholders to take no action in respect of their shares or the offer until they receive further information from Macmahon, including a formal recommendation,” the company stated.
“The offer is unconditional and as such, Cimic is only able to withdraw the offer in very limited circumstances. There is therefore no urgency for shareholders to sell their shares, accept the offer or take any action at all at this time.”
Macmahon also stated that it was experiencing an improved opportunity pipeline in the resources sector and had several new material opportunities nearing outcomes.
“Macmahon anticipates being in a position to announce details of a second contract in Indonesia in the coming weeks,” it reported.
“Given CIMIC’s participation in the industry through its subsidiary Thiess, CIMIC would be well aware of the improving market conditions and of Macmahon’s progress with some opportunities in which Macmahon and Thiess are in direct competition.”
A day after the offer was made, Macmahon reported an optimistic outlook at its largest contract, the Tropicana gold joint venture between AngloGold Ashanti and Independence Group. Macmahon outlined that increased volumes for the year ahead at Tropicana would result in a revenue increase of about 25 per cent from the contract.
Macmahon expects to formally receive CIMIC’s bidder’s statement for the offer no earlier than February 7. The offer period will last for one month once it has received the statement.