SEMBAWANG AUSTRALIA has cranked up the pressure on Macmahon Holdings by lobbing a counter-bid for the contractor's construction business, which is already in the process of being sold to Leighton Holdings.
The subsidiary of Indian conglomerate Punj Lloyd has raised 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 the major projects within the business - by $5 million.
The aggressive move puts Macmahon's management in a tight spot as it is obliged to consider a superior offer, while risking turning its back on its major shareholder in doing so.
Sembawang has also threatened legal action against the sale of the business to Leighton, alleging it approached Macmahon in November - before it signed the memorandum of understanding with Leighton that prevents it from granting a third party due diligence.
"Sembawang has been eyeing Macmahon's construction business for over four years now and believes that the time is right to make this offer given the fit in strategies for both companies," said Sembawang's chief executive, Richard Grosvenor - himself a former Leighton executive.
Leighton owns 24 per cent of Macmahon, and has shown strong financial support in a difficult time for the contractor. With cash-strapped Macmahon hit by a big profit downgrade, Leighton stumped up its full entitlement in a heavily discounted equity raising last month and also took part in the institutional shortfall bookbuild.
"Importantly, the acquisition of these projects [Macmahon's construction projects] will be accretive for the Leighton Group and will be efficiently absorbed into our business given our greater scale. The exit of Macmahon from construction will allow them to focus on their core contracting mining business and to substantially reduce overheads," the Leighton chief executive, Hamish Tyrwhitt, said at the time.
In return, Leighton and Macmahon signed a memorandum of understanding for major projects within the construction business, which has since progressed to a purchase agreement. Leighton says it expects the agreement to be honoured.
But the deal remains subject to shareholder approval at an extraordinary general meeting to be held next month.
Shares in Macmahon closed 0.5¢ higher at 28¢ on Thursday.