The market yesterday cheered the announcement by Murray & Roberts (M&R) that it had agreed to sell its Australian subsidiary, Clough, to Webuild for R4 billion as it pairs debt and secures an urgent working cash injection.
The news sent its shares surging to an intraday high of R6.10, rising by a whopping 32%. The shares have dipped by 57.22% in the past six months.
Henry Laas, M&R group CEO, said: “This is a critical step, as the ERI (energy, resources and infrastructure) platform 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.”
Yesterday, the engineering and contracting group said the announcement followed its cautionary and trading statement on October 1.
This outlined that the group’s working capital requirements were particularly acute in the ERI platform, where project cash flows had been dislodged by Covid-19-related disruption, along with the need for additional working capital arising from the margin deterioration on the Traveler (US) and Waitsia (Australia) projects.
At the same time the group, which has a market cap of R2bn, warned the margin deterioration would result in the financial results for the six months ending December 31, 2022, to be at least 100% down on the previous and corresponding reporting period.
Webuild is a multinational Italian industrial group specialising in construction and civil engineering headquartered in Milan.
M&R said Webuild had a history of working with Clough on major projects, including its joint venture with Clough on Snowy 2.0, a hydropower project in Eastern Australia, and its participation with Clough and other members in Regionerate Rail, a consortium appointed as preferred bidder for the development of the Gowrie to Kagaru section of Inland Rail.
Laas said: “The group reviewed a number of strategic options to address Clough’s working capital needs, which have become increasingly urgent. Having reviewed all available alternatives and based on the above background, the board of directors of Murray & Roberts concluded that a transaction with Webuild was the preferred course of action.”
M&R will get A$350 million (R4bn), through the cancellation of an outstanding inter-company loan account between M&R and Clough as well as a cash payment of A$500 000 from Webuild.
“The inter-company loan in favour of Clough originated through the buyout of the minority shareholders in Clough by Murray & Roberts in 2013,” it said.
M&R said the sale and purchase agreement was subject to several conditions, including regulatory approvals in Australia and third-party consents, as well as continuing obligations typical for a transaction of this nature.
M&R said after the deal got the green light, it would be structured into two business platforms for operational purposes: the multinational mining platform and the sub-Saharan Africa-focused power, industrial and water platform. File photo
Operationally, the group is currently structured to deliver its projects through three business platforms: the mining platform; the energy, resources and infrastructure platform; and the power, industrial and water platform.
M&R’s interests in Australia would continue through RUC Cementation Mining, one of the three operating companies in the group’s multinational mining platform, said Laas.
Rod Lowe, a fund manager of AG Capital Value Flexible fund (@RodloweLowe) tweeted, “Financial benefit for the proposed transaction to MUR is circa R4 billion! Their market cap was R1.8 billion @ R4.60. NAV is R13. Price gap at R6.60 should close soon on this.”
Anthony Clark, an independent trader at Small Talk Daily (@smalltalkdaily) tweeted, “Gees s**t must be hitting the fan at $JSEMUR Murray & Roberts if your selling your crown jewels fast to raise cash due to a short-term crunch. #MUR to sell 100% of its Aussie biz Clough; biz it always lauded.”
David Eborall, a portfolio manager at SaltLight Capital Management (@davideborall) tweeted, “No domain knowledge of MUR but this looks like 2x the market cap? I always thought Clough was the crown jewel ... But they’re selling it at A$350m.”
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