CIMIC break-up of Thiess assets to pique Macmahon interest

Macmahon Holdings is believed to be keen to secure Thiess assets

The Spanish-controlled majority owners of CIMIC could head towards a break-up plan for its subsidiary Thiess should a buyer not be found for the entire business, according to analysts in the market.

Private equity firm Apollo was believed to be keen to buy Thiess last year, but its interest is understood to have since cooled.

The challenge for divesting Thiess is always thought to have been its size, with the world’s largest mining services provider estimated to be worth more than $3bn.

Some in the market believe selling off Thiess in parts could be the best path for the subsidiary that was formed by a series of acquisitions and amalgamations of other operations. Thiess offers development, extraction, processing and remediation services.

It established an Indonesian joint venture in 1988 and the expectation is that if the business was to be sold, the Indonesian government would be keen for a local operator to have an involvement.

Macmahon Holdings is not currently looking at Thiess, but should an opportunity arise to buy only part of the operation, it is believed to be keen to secure assets. Sources say the contracting business would attract Macmahon’s attention, with much of that work happening in Indonesia.

Macmahon, which is listed with a $625m market value, was in 2017 subject to a $175m takeover bid by CIMIC. However, CIMIC’s plans to buy Macmahon were thwarted when the company instead unveiled a new deal with an Indonesian white knight.

Amman Mineral Nusa Tenggara purchased a 40 per cent stake in Macmahon in exchange for a long-term contract well over the offer price by CIMIC.

While plenty of connections exist between CIMIC and Macmahon, holding the listed company at bay when it comes to Thiess has always been the large price. However, should only part of the portfolio be placed up for sale, an acquisition could be within its grasp.

MacMahon counts former Thiess boss Bruce Munro as among the directors on its board, while director Hamish Tyrwhitt is the former CIMIC chief executive. Board member Alex Ramlie has also had an involvement with Thiess in the past.

Macmahon overhauled its board in September following the sudden departure of its chairman Jim Walker. While traditionally focused on open-pit mining in WA’s gold industry, Macmahon’s biggest single contract is now at the giant Batu Hijau copper-gold mine in Indonesia, and as The Australian earlier reported, its new boardroom recruits suggest the company is looking to Asia for future growth as Mr Tyrwhitt and Mr Munro both have significant experience in mining in Asia.

The pair left Leighton and Thiess in the executive exodus after Spain’s ACS won control of the Australian construction and contracting giant in 2014. Macmahon has put the worst of a torrid few years behind it, after posting a vastly improved set of results in August’s annual financial figures.

Revenue was up 55 per cent at $1.1bn for the financial year, with underlying earnings before interest and tax up 81 per cent at $75m.

There have been positive signs for the company, with a growing order book and an upswing in WA’s mining sector, and Macmahon shares have recently rallied after falling due to a loss-making mining contract at Newcrest Mining’s Telfer operation.

Thiess is the world’s largest mining services provider. Working on the possible sale of Thiess has been JPMorgan.