CIMIC makes hostile, $524m takeover bid for UGL

UGL stock soared 48pc as it urged shareholders to take no action on a hostile bid by construction giant CIMIC.

Seeking synergies: CIMIC boss Marcelino Verdes.

Engineering and construction giant CIMIC has made a hostile $524 million play for control of smaller rival UGL.

The development helped push UGL shares up 48 per cent in morning trade, while CIMIC shares have risen as much as 3.3 per cent.

CIMIC (CIM), which secured 13.84 per cent of UGL over the weekend, said it would offer UGL shareholders $3.15 per share, a robust 47.2 per cent premium to the group’s last traded price of $2.14.

The proposed off-market takeover has been tagged as “final” by the suitor, with the move to go direct to shareholders seeing it bypass the need for board approval.

UGL (UGL) appeared to be taken by surprise after CIMIC snuck onto its register, urging shareholders to not take any action on the all-cash proposal.

“The board of UGL will meet as soon as possible to consider the offer and will provide further advice to shareholders at that time,” the company said.

“In the meantime, the board of UGL recommends that shareholders take no action in relation to the CIMIC announcement.”

Should CIMIC prove successful in claiming control of the target it said it would immediately commence a strategic review of operations, seek to generate synergies, assess current capital management plans, delist UGL from the ASX, seek to retain operational employees and turn over the target’s board.

“CIMIC believes UGL’s competencies are complementary to CIMIC’s existing operations or enhance CIMIC’s capabilities in new activities,” the suitor said in a statement.

CIMIC added it had tapped Macquarie Securities to purchase any shares made available at the offer price.

The suitor said it was confident of receiving regulatory approval, with the green light already granted by the Foreign Investment Review Board and the Australian Competition and Consumer Commission indicating a formal review will not be required.

The deal will be funded using existing debt and cash facilities.

At 11.10am (AEDT), UGL shares surged 47.9 per cent to $3.165, slightly above the offer price, while CIMIC advanced 1.5 per cent to $27.71.

CIMIC, founded in Australia in 1949 and previously known as Leighton Holdings, is almost 73 per cent owned by Germany’s Hochtief, which in turn is controlled by Spanish construction company Actividades de Construccion y Servicios SA. It occasionally has worked with UGL as part of consortia and through subcontracts, work that currently includes their involvement in rail work in Sydney.