Posted by Daniel Gleeson on 16th April 2024
Macmahon Holdings Limited has entered into a Scheme Implementation Deed (SID) under which it will acquire 100% of the issued share capital of Decmil Group Limited for an implied enterprise value for Decmil of A$127 million ($81 million).
Decmil provides multi-disciplinary project delivery across the infrastructure, resources and renewable energy sectors, and has been in operation for over 40 years. It also provides an established and scalable foundation to accelerate growth in Macmahon’s civil infrastructure business, diversify earnings and improve overall returns on invested capital through its lower capital intensit, the company says.
On completion, Macmahon intends to operate Decmil as a wholly owned subsidiary and to maintain the Decmil branding, with the existing Macmahon civil business to integrate into the subsidiary. Decmil will continue to be led by its current Chief Executive Officer, Rod Heale.
Michael Finnegan, Managing Director and Chief Executive Officer of Macmahon, said: “The acquisition of Decmil is a significant milestone in Macmahon delivering on its long stated strategy to diversify its earnings and deliver a more resilient, scalable business enabling greater returns to shareholders.
“Decmil provides an established, well credentialed platform to allow Macmahon to better pursue the large opportunity pipeline of resource civil infrastructure and rehabilitation opportunities while diversifying earnings towards renewables and infrastructure, which are both expected to have an increased level of spending in the next decade.
“I look forward to the transaction successfully completing and welcoming Decmil into the Macmahon team.”
The acquisition of Decmil is consistent with Macmahon’s strategic focus of achieving continued earnings growth while diversifying earnings into the less capital intensive civil infrastructure business, it says. The transaction offers a strategic fit, enhances and accelerates earnings diversification, with financial metrics that are compelling for Macmahon shareholders.
It added: “Decmil has a complementary service offering to Macmahon, providing integrated civil construction and infrastructure solutions to the resources, infrastructure and renewable industries across Australia. Its core operations add increased exposure for Macmahon to both the renewable and government infrastructure sectors which have a steady growth trajectory. The Decmil business has established robust processes and operating systems, including holding the licences to carry out a full range of road and bridge projects throughout Australia. Macmahon will leverage these to accelerate growth towards its long-term civil infrastructure
revenue target of $1 billion per annum, or one third of group revenue.”
The acquisition adds circa-A$6 billion to Macmahon’s existing civil pipeline of A$4 billion, and contributes an order book of circa $450 million (as at 31 December, 2023). This creates a more resilient business with less concentrated resource commodity exposure and provides a natural hedge to the cyclicality of contract mining.
This gives access to non-mining civil construction, including renewables and government infrastructure projects, broadening our east coast presence in Victoria and Queensland with an opportunity to expand into including New South Wales and South Australia.
It is anticipated that Decmil shareholders will be given the opportunity to vote on the schemes at the scheme meeting which is currently anticipated to be held in early August 2024.