Clough sold to Webuild

UPDATE: Administrators for Clough have struck an agreement to sell its Australian business and key assets to Italy’s Webuild, the company that pulled out of a lifeline deal to save the Perth engineer just over a week ago.

Webuild will take on two of Clough's largest projects, with an option to buy more.

It comes hours after Business News had confirmed that Webuild has been in contact with administrators from Deloitte as a bidder for the engineering firm.

Webuild had been set to buy 100 per cent of Clough from South Africa’s Murray & Roberts for $500,000 and the forgiveness of a $350 million loan but pulled out of the conditional deal.

That triggered Clough going into voluntary administration and meant Webuild was able to negotiate a deal with Deloitte.

Webuild disclosed late today it would pay $17.6 million, and assume employee entitlements, for the assets it is acquiring.

These comprise Clough’s Australian offices, brand, business references, senior management and personnel, plus its share of the Snowy 2.0 and Inland Rail contracts.

Clough and Webuild are partners on thr two  projects, with Snowy 2.0 underway and Inland Rail expected to proceed next year after their consortium was selected in March as preferred contractor.

They both have multi-billion dollar budgets and involve extensive tunnelling, which is one of Webuild's core skill sets.

Webuild also has an option to buy other projects “if accretive conditions for the group are guaranteed, consistently with its financial objectives”.

That is code for Webuild saying it will only take on projects if it can negotiate acceptable terms with the project owners.

At the Waitsia gas project north of Perth, for instance, Murray & Roberts has previously disclosed that Clough was suffering margin pressure.

It is likely, therefore, that Webuild will seek to negotiate more favourable contract terms with project owners Mitsui & Co and Beach Energy.

Webuild has an exclusivity period up until 21 December 2022 to define and agree the final contract.

“This is a significant development, achieved just over a week into our appointment, and involving a highly complex business, equally complex projects and multiple stakeholders,"  Deloitte Turnaround & Restructuring partner Jason Tracy said.

“In the last week, we have developed productive relationships with project principals and partners, and now have interim and ongoing funding agreements in place across 95 per cent of projects by value.

“This provides stability for those projects, clients and joint venture partners, employees, sub-contractors and other stakeholders."

Mr Tracy said the administrators had also pursued recapitalisation and sale opportunities and fielded strong interest from a range of parties.

“Importantly, a transaction with a party such as Webuild will minimise the crystallisation of significant potential liabilities against the Clough Group.”

The administrators specified that fresh funding has been provided for five major Clough projects.

These are Snowy Hydro 2.0, the Waitsia gas project in WA, the Tallawarra project in NSW for Energy Australia, the Energy Connect project in NSW for Transgrid and the Lombrum naval base in PNG for the Australian Department of Defence.

This list does not include the $165 million Stephenson Ave extension for Main Roads Western Australia.

That project is being built in a joint venture with ACCIONA and WSP Australia.

Nor does it include shutdown work Clough has been undertaking for Newcrest Mining at the Lihir gold mine in PNG.

Today’s updates from Deloitte and Webuild make no reference to Clough’s expansive operations in the US, where half its 2,500 staff are employed.

The future of those operations remains unclear.

Nor did they reference the $A6.4 billion Perdaman urea project in the Pilbara.

Clough and Italy’s Saipem signed a $US2.7 billion EPC contract with Perdaman early this year but the project has not yet reached a final investment decision.

Webuild also provided more insight today into the shock collapse of its original Murray & Roberts deal.

As well as a due diligence review, it was subject to the provision of sufficient collateral for an interim $30 million loan to be provided by Webuild to Clough before completion of the acquisition.

Webuild said these conditions precedent were not met.