CIMIC targets Sedgman in takeover bid

CIMIC Group has made an offer to acquire coal handling and preparation experts, Sedgman, in a bid that values the company as AUS256 million.

CIMIC, formerly known as Leighton Contractors and owner for Thiess, the world’s largest contract miner, already holds just under 37% of Sedgman shares and is now aiming to increase its control of the group to “better support the future direction of Sedgman”, it said in its Bidders Statement.

In response, Sedgman has advised its shareholders to sit tight until its board of directors has had time to consider the offer. The board has formed a sub-committee undertake this review and has appointed Citi as financial adviser and Norton Rose Fulbright as legal adviser.

Should the takeover succeed, CIMIC has said it would “reconstitute the Sedgman board” and review the dividend and capital management policies of Sedgman – a clear reference to a dispute last year between CIMIC and Sedgman Chairman, Rob McDonald.

CIMIC voted against Sedgman’s remuneration report and opposed the appointment of three independent directors at the company’s annual general meeting. Instead, it demanded Sedgman appoint a second CIMIC-nominated director and reduce the board’s side to five people.

It also wanted direct involvement in Sedgman’s decision making processes, said McDonald in an interview with the Australian Financial Review at the time.

CIMIC is owned by Spanish construction company, Grupo ACS, which sent Spanish executives to run the company after gaining control from its Australian management team in early 2014. Since then, ACS has had some success in turning parts of CIMIC around – success it seems keen to build on at Sedgman.

“There appears logic in the view that […] Sedgman could also be improved, Ben Brownette, an analysts at Commonwealth Bank told the Sydney Morning Herald, noting the CIMIC could also target mining-related businesses, Barminco and Ausdrill.

CIMIC’s existing mining business, Thiess, has recently announced a slew of new contracts at coal mines in Australia and Mongolia and was also mentioned as one of the reasons behind the Sedgman bid with CIMIC noting that a number of joint venture arrangements existed between Thiess and Sedgman to deliver certain engineering projects.

Written by Jonathan Rowland.

Read the article online at: https://www.worldcoal.com/handling/14012016/cimic-targets-sedgman-in-takeover-bid-2016-53/