17/07/2017 - 14:55

M&A deals take surprise twists

17/07/2017 - 14:55

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SPECIAL REPORT: Perth companies Macmahon Holdings and ASG Group have illustrated how contested takeover deals can deliver unexpected outcomes.

M&A deals take surprise twists
Michael Finnegan (left) and Jim Walker are looking forward to focusing on Macmahon’s growth opportunities. Photo: Attila Csaszar

The possibility of a takeover bid was a regular topic of discussion at Macmahon Holdings’ board meetings during the past year, especially with renowned hostile bidder CIMIC Group sitting on its share register.

The mining contractor spent a lot of time preparing for this possibility, but admits the final outcome was not what it originally anticipated.

“We were prepared, we had advisers, we had plans, but the final outcome certainly wasn’t what we put on the whiteboard in the very first meeting,” chief executive Michael Finnegan said.

Mr Finnegan was speaking after Macmahon shareholders backed a tie-up with Indonesian group PT Amman Mineral Nusa Tenggara (AMNT), which is set to acquire a 44 per cent shareholding.

The AMNT deal dashed any lingering hopes Cimic might have held, so it was no surprise Cimic sold its 23 per cent stake early this month.

“We’re happy its worked out that way, it’s cleaner, and made it easier for us to move forward,” chairman Jim Walker told Business News.

There were a few surprise twists and turns during the six months between Cimic launching its takeover and last week’s shareholders’ meeting.

One was the resignation of Macmahon’s original advisers, Macquarie Capital and Ashurst, which had worked for Cimic on other east coast transactions.

“It was a little bit of a shock at that point in time,” Mr Walker commented, before praising the professionalism of the outgoing advisers, who handed over to Azure Capital and Johnson Winter & Slattery.

“All four parties performed very well,” he said.

Mr Walker declined to criticise Cimic’s approach.

“Anyone that’s in a takeover, you need to be aggressive,” he said.

“The same thing in defence; if you’re confident your defence is correct, you will be just aggressive in reverse.

“I must admit, there were no direct communications at all from the time they lodged their bid to today.

“It has been done through advisers and lawyers, which perhaps makes it easier.”

By contrast, Mr Walker said he and Mr Finnegan had been in discussions with AMNT since early 2015, initially focused on contracting opportunities before the talks widened to the potential for a strategic relationship.

The two men say they are now focused on growth opportunities, including more contracting work at AMNT’s Indonesian operations.

ASG Group is another Perth company that has achieved a good outcome in a takeover battle, with a few twists and turns.

The IT consulting group, which counts Perth firm Castle Gates Australia among its advisers, has negotiated a $123 million takeover of Melbourne-based SMS Management & Technology.

SMS had been working for months on a friendly merger with listed company DWS, before ASG swooped at the 11th hour and trumped its rival.

The SMS deal came just a few months after Japan-based IT services firm Nomura Research Institute wrapped up its $349 million purchase of ASG.

With Nomura’s powerful backing, ASG boss Geoff Lewis will soon be in charge of an expanded national business with 2,100 staff and annual turnover of $500 million.

Fellow Perth companies Neometals and Quintis have not managed to match the good news at Macmahon and ASG.

Neometals announced in April plans to sell its minority stake in the Mt Marion lithium mine for $125 million, so it could pursue higher margin opportunities.

After failing to attract a buyer, Neometals told the market it was a good asset to keep after all.

Sandalwood producer Quintis finds itself in a far worse position.

Nearly four months after short-seller Glaucus launched an extraordinary attack on the business, after which managing director Frank Wilson resigned to pursue a possible takeover deal, Quintis is still in the twilight zone.

That’s despite both sides having a wealth of advisers, with Goldman Sachs, Clayton Utz and Cannings Purple advising Mr Wilson, and UBS advising the company.

One of the notable features of the corporate finance market is the role Perth-based advisers play in national and international deals.

The latest example is FTI Consulting managing director Shaun Duffy, who has been advising Middle East-based Dar Group on its tilt for Sydney-based engineering company WorleyParsons.

Dar Group has acquired a 19.9 per cent stake in WorleyParsons after its takeover advances were rebuffed late last year.

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