Macmahon suitor walks away after takeover talks turn sour
THE stoush for control over the construction arm of Macmahon Holdings has turned sour, with Indian-owned suitor Sembawang walking away from its offer, but not without first lashing out at what it says was "egregious action" taken by the Macmahon board.
Sembawang said on Sunday that its bid for the construction businesses of Macmahon had lapsed and it would not be making any further offers. And it took the unusual step of releasing a private email chain purported to prove takeover discussions between the companies' two chief executives - appearing to contradict Macmahon's claims over the timing of Sembawang's initial approach.
Sembawang Australia's chief executive, Ric Grosvenor, accused his counterpart at Macmahon, Ross Carroll, of "sheltering" behind a purchase agreement with major shareholder Leighton Holdings, and providing a series of "misleading and deceptive representations".
"This is an egregious action taken by the board of Macmahon, who appear to have something they don't wish the market to discover and is possibly due to the fact that the company was in financial distress before a capital raising," Mr Grosvenor said.
"The minority shareholders of Macmahon are the losers here."
The email chain shows the two chief executives on friendlier terms on November 12. Mr Grosvenor told Mr Carroll he was "impressed" by his performance as Macmahon's chief executive, and floated the possibility of Sembawang - a wholly owned subsidiary of Indian conglomerate Punj Lloyd - taking a 5 per cent stake in the contractor.
On November 22, Mr Carroll replied that "we have a bit going on in this space at the moment" and requested two weeks to consider the proposition.
Mr Grosvenor replied on November 26: "If what you mean by 'we have a bit going on in this space at the moment', has anything to do with divesting parts of your construction operations, we would be happy to consider purchasing the whole construction business, leaving Macmahon Holdings with your contract mining business."
The next reply from Mr Carroll, according to the email chain, appears to be on December 7, when he said: "It will become clear on construction sometime next week but unfortunately we won't be able to do anything with you in that space."
By December 12, Macmahon had entered a trading halt and announced a capital raising as part of an agreement to sell the majority of its construction business to its 24 per cent shareholder, contracting giant Leighton Holdings.
The agreement was part of a deal struck between the two companies in exchange for Leighton fully subscribing to Macmahon's heavily discounted capital raising.
Macmahon has said it cannot provide Sembawang with due diligence access while its purchase agreement with Leighton remains in play.
In a statement to the stock exchange on Friday, Macmahon said Sembawang's latest bid remained "unsolicited, non-binding, incomplete and highly conditional", and it was not in a position to respond.
This was in response to a sweetened Sembawang offer made on Thursday. It upped its original offer to buy Macmahon's construction arm from $25 million to $38 million.
Alternatively, it has offered to trump Leighton's separate offer, to acquire major projects within the business, by $5 million.
Mr Grosvenor said Macmahon was short-changing its minority shareholders by not considering the deal. "The Sembawang offer says what it says and means what it means," he said.
A Macmahon spokesperson said: "Macmahon provided an update to the market in relation to the Sembawang proposal on Friday and will continue to keep its shareholders informed. No further comment will be provided at this time."
After forecasting profit growth of 20 per cent in August, Macmahon warned in September that its 2012-13 net profit could fall by more than 50 per cent, leading to a massive plunge in the share price of nearly 50 per cent at the time.
Nick Bowen resigned as chief executive after the downgrade and was replaced by the company's chief operating officer for mining and former chief financial officer, Mr Carroll.