21/05/2008 - 13:55

Macmahon launches $446m bid for Ausdrill

21/05/2008 - 13:55

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Construction and engineering firm Macmahon Holdings Ltd has launched a $446 million takeover bid for Canning Vale-based Ausdrill Ltd, a year after the drilling contractor revealed it had been approached by an unidentified suitor.

Macmahon launches $446m bid for Ausdrill

Construction and engineering firm Macmahon Holdings Ltd has launched a $446 million takeover bid for Canning Vale-based Ausdrill Ltd, a year after the drilling contractor revealed it had been approached by an unidentified suitor.

Macmahon is offering 1.45 of its own shares for every Ausdrill share, valuing the stock at $2.59 each.

Should both companies merge it would create an entity with a market capitalisation of around $1.4 billion, Macmahon said.

"Ausdrill's a fine company, Macmahon's a fine company and together they'll be a great company," Macmahon chairman Dick Carter said in a teleconference this afternoon.

Macmahon's approach comes 12 months after Ausdrill revealed it had been "confidentially" approached by a party with assets worth about $2 billion regarding a potential takeover.

In the teleconference today, Macmahon chief executive Nick Bowen said that party was not his company, although during that period discussions with Ausdrill had been held with no agreeable outcome.

As a result, Mr Bowen said Macmahon launched today's takeover offer without seeking support from Ausdrill's board.

Mr Carter said he did give Ausdrill chairman Terence O'Connor a courtesy call before the bid was lodged today, which took him by surprise.

Meanwhile Mr Bowen said the merger with Ausdrill fitted into Macmahon's growth strategy of scale, diversification and geographical spread.

"Ausdrill gives us further scale, Ausdrill gives us diversification of our business certainly by getting an access to the exploration business where we will be the only contractor to offer an end to end solution to contract mining," Mr Bowen said.

"Certainly Macmahon has made it clear previously that it wants to grow its business overseas, Africa is one of the places we have been looking and the acquisition of Ausdrill certainly accelerates the entry into that market quicker than organic growth over there."

Macmahon chief financial officer Ross Carroll said if the merger was to go ahead, it would take two to three months to consummate and any impact on Macmahon's bottom line will not be seen until next financial year.

He said analysts have forecast Ausdrill to report earnings of around $33 million this year.

The offer is subject to a minimum acceptance of 50.1 per cent.

 

Full announcement below:

Macmahon Holdings Limited is pleased to announce its intention to make an off-market takeover
offer for all of the shares in Ausdrill Limited .
Under the Offer, Macmahon is offering all Ausdrill shareholders 1.45 Macmahon shares for each Ausdrill share.
This values Ausdrill at $2.59 per share, or approximately $446 million, and implies a substantial premium of
32.7% based on the closing prices of Macmahon shares and Ausdrill shares on 20 May 2008. The Offer is
conditional on Macmahon receiving acceptances for 50.1% of Ausdrill shares, and on certain other conditions
set out in Annexure B to this announcement.
A combined Macmahon and Ausdrill will be a leading diversified mining contracting and civil construction
company, with a market capitalisation of approximately $1.4 billion and membership of the S&P/ASX 200 index.
The Macmahon Board and management believe Macmahon and Ausdrill have highly complementary businesses and customers and the combination will present significant benefits to all shareholders of both companies.
A combination of Macmahon and Ausdrill (the Combined Group) will:
- be well positioned to benefit from the attractive outlook in the mining contracting and construction
industries in Australia and overseas over the short to medium term;
- offer increased geographic spread and improved commodity and line of business diversification;
- capitalise on both Macmahon's and Ausdrill's existing blue chip and government customer relationships
to extend the range of services offered and be well placed to win further contracts; and
- have increased equity market scale and a larger balance sheet which will enhance the Combined
Group's access to debt and equity capital to fund organic growth as well as to make further value enhancing acquisitions.
Ausdrill shareholders will also have the opportunity to realise a substantial premium for their Ausdrill shares and
at the same time gain exposure to the significant upside offered by the Combined Group.
Macmahon Chairman, Dick Carter, said; "In light of the ongoing consolidation in the mining industry, it is becoming increasingly important for mining service providers to have the scale to maintain their competitive position and to effectively service their customers.
"A combined Macmahon and Ausdrill will be able to extend the range of services offered to their combined customer base. For example, the Combined Group will be able to provide the Macmahon mining customers with exploration services and Ausdrill's existing customers expanded mining and construction services."
Macmahon Chief Executive Officer, Nick Bowen said that the Offer presents a compelling value proposition for Ausdrill shareholders.
"By accepting the Offer, Ausdrill shareholders can convert their shares into Macmahon equity at a substantial
premium while retaining an investment in a larger company with greater market liquidity, an enhanced mining
service offering and a material presence in the high growth market for construction in Australia".
"The combination also offers Ausdrill shareholders increased geographic spread, and improved commodity
diversification through exposure to Macmahon's significant operations in bulk minerals such as iron ore and
coal," he said.

Ausdrill shareholders are also expected to benefit from the attractive investment features of Macmahon. These
include a substantial order book (currently at $2.1 billion) which has grown at a compound annual growth rate of
56% from 30 June 2003 to 30 June 2007, as well as a strong management team which has delivered totalshareholder returns of 639% over the last four years.
Further information about the Offer can be found in more detail in Annexure A to this announcement as well as
in the Macmahon Bidder's Statement, which will be lodged with the Australian Securities & Investments
Commission tomorrow.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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