CIMIC flush after sale of Thiess stake to Elliott Management
Contracting giant CIMIC has closed 2020 on a high note with the sale of its half of mining services unit Thiess to Elliott Management.
Contracting giant CIMIC has closed 2020 with a high note, saying the sale of half of its mining services unit to hedge fund Elliott Management has yielded more cash than previously expected.
CIMIC said on Thursday it had finalised the sale of a 50 per cent share in Thiess to Elliott Advisers, the British arm of US hedge fund Elliott Management, for $2.2bn in cash – well above the $1.7bn to $1.9bn estimate it provided when announcing the deal in October.
The company said the additional cash reflected “transaction closing adjustments and the final financial position of the underlying Thiess business”.
CIMIC chief executive Juan Santamaria said the bulk of the proceeds would be used to pay down debt, but said they could also be used to help grow the company’s other businesses.
CIMIC was carrying $1.67bn in net debt at the end of September, and the cash will also help relieve some of the strain on the company’s balance sheet exposed by its need to unwind controversial supply chain financing arrangements that previously caused concerns about the true state of its financial position.
Its use of reverse-factoring arrangements was down $705m to $146m, compared to the end of 2019, the company said in October, with factoring arrangements down $134m to $1.83bn. It had gross cash of $3.6bn at the end of the September quarter.
Ratings agency S&P Global issued CIMIC a warning over its credit rating in the wake of the October announcement of the sale of half of Thiess, saying the cash may not be enough to protect its position.
S&P put the BBB credit rating of CIMIC’s Spanish parent ACS on “credit watch negative”, saying that despite the company’s initial announcement the sale would yield $1.7bn-$1.9bn, the selldown could reduce its scale and diversity and “add complexity to the group structure and governance, and have implications for its adjusted credit metrics”.
In November CIMIC finally caved to pressure and returned to 30-day payment terms for its thousands of small business suppliers, after pushing out payment terms from 45 to 65 days in 2019 across its operating businesses, including engineering arm UGL and civil contractors CPB.
CIMIC’s mining services division, dominated by Thiess, was its best performer in the first half of 2020, delivering pre-tax profits of $262m on revenue of $1.96bn, with profit up 11.3 per cent on the first half of 2019 even thorough revenue was down 4.6 per cent.
Thiess runs mining operations across 25 projects in Australia, Africa, Asia and the Americas, with annual revenue of about $4.1bn.
The deal excludes engineering group Sedgman, bought by CIMIC for $256m after a hostile takeover tilt, and now generating about $400m a year in annual revenues for CIMIC.
