Webuild abandons Clough deal

Italy's Webuild has backed out of a conditional deal to buy struggling engineer Clough, plunging the 102-year old Perth-based company into administration.

In a scant statement published today, Webuild said there was no reasonable prospect that the acquisition would reach a successful completion and has terminated the agreement with immediate effect.

As a result, the directors of Clough – which is owned by South Africa's Murray & Roberts – have appointed Deloitte as administrators of the company.

It comes a matter of weeks after Murray & Roberts agreed to sell the engineering subsidiary to Webuild for $500,000 in cash and the cancellation of a $350 million loan.

The Deloitte administrators are led by its national restructuring leader, Melbourne-based Sal Algeri, supported by three financial advisory partners - Sydney-based Jason Tracy, Melbourne-based Glen Kanevsky and Brisbane-based David Orr.

Curiously, none of the administrators are based in Perth, where Clough has its head office.

To keep the company afloat, Webuild had planned to grant Clough a $30 million loan to see it through during the due dilligence stage until the deal was finalised.

The trigger for the collapse of the deal appears to be Webuild’s decision to not provide that loan to Clough.

Announcing the planned sale last month, Murray & Roberts had said this was critical.

“This is a critical step, as (Clough) is in immediate need of a significant cash injection to service their order book and commercial commitments, which Murray & Roberts is not able to provide,” the company said.

Mr Algeri said late today that he would seek alternative funding as a matter of urgency.

“With our appointment, over the next two to three days, we will carry out an urgent assessment of the financial position of the Clough Group companies, with a view to sourcing immediate interim funding to be able to continue work on as many projects as possible as quickly as possible," he said.

"An accelerated sale and recapitalisation process will also commence."

He noted that Clough has approximately 1250 Australia-based employees, and approximately 1250 overseas employees in Papua New Guinea, the UK and the USA.

Deloitte's Mr Tracy asked for all stakeholders to be patient.

“We understand this news will be unsettling, disruptive and stressful for stakeholders, including employees, customers, joint venture partners, contractors and suppliers,” he said in a statement.

“We ask that all stakeholders be patient while we work through options and begin engaging with employees, unions, principals, subcontractors, joint venture partners, regulators and others as soon as practicable.

“Clough Group has a long history both in Western Australia and nationally, and involvement in a diverse range of important projects. We will be pursuing all options to find a new owner to take the business forward.”

Murray & Roberts has previously disclosed Clough was suffering declining margins on two major projects - the $750 million Waitsia gas field development north of Perth (owned by Mitsui & Co and Beach Energy) and the Travelers petrochemical facility in Texas.

In addition, Clough and Webuild are joint venture partners on the giant Snowy 2.0 hydro power project, which is believed to have suffered big cost increases and delays.

Clough's other WA projects include the Stephenson Avenue extension for Main Roads Western Australia.

Mitsui & Co’s local energy arm indicated it has been preparing for this possibility.

“Mitsui E&P Australia, together with our joint venture partner Beach Energy, have been working to develop a robust plan to respond to this scenario, and we will continue to work collaboratively to implement our plan,” it said in a statement.

In addition to projects underway, a joint venture comprising Clough and Italian company Saipem have been selected as the preferred engineering and construction contractors for one of WA’s largest upcoming projects - Perdaman’s $US4.2 billion urea project in the Pilbara.

They signed a $US2.7 billion contract in May covering the construction of a two million tonne urea plant, ammonia production facilities, a 100-megawatt gas plant, a water treatment plant and seven kilometres of closed conveyor to the port.

Recently lodged financial statements illustrate the depth of Clough’s financial woes.

The company incurred an underlying loss of $48.1 million in the year to June 2022 and a net loss of $375 million after writing off most of the debt owed by Murray & Roberts, according to a report in The Australian.

It had a working capital deficit of $304 million.

That was despite an increase in revenue to $1.46 billion.

The $350 million intercompany loan, which was set to be cancelled as part of the Webuild transaction, originated in 2013 when Clough provided a loan to Murray & Roberts so the South African group could buy out the Perth firm’s minority shareholders.

In an announcement on the Johannesburg Stock Exchange today, Murray & Roberts agreed to terminate the proposed transaction.

"In the absence of the Interim Loan, however, the board of directors of Clough have been left with no choice but to place Clough and its subsidiaries under voluntary administration in Australia with immediate effect," the announcement said.

"Due to Clough being placed into voluntary administration, the board of directors of Murray & Roberts Pty Ltd (MRPL), an indirect wholly owned subsidiary of the group and the group’s holding company in Australia, have resolved to place MRPL into voluntary administration given the intercompany loan account for the benefit of Clough."

Murray & Roberts said its only other asset in Australia was its investment in RUC Cementation Pty Ltd, which is part of its mining platform.

“RUC, which has a net asset value of A$85 million (equivalent to approximately R1 billion), has not been placed into voluntary administration,” Murray & Roberts said.

Webuild said it would continue to look for opportunities for growth, including in the Australian market, in accordance with its previously announced strategies.