Post Market Wrap | CIMIC recommends acceptance of $22 cash offer by HOCHTIEF

This Post Market Wrap is presented by KOSEC – Kodari Securities

• Independent Expert’s mid-point valuation $22.15 a share
• HOCHTIEF entitled to 85 percent of CIMIC; competing bid highly unlikely
• CIMIC shareholders not entitled to 36 cents Unfranked Final dividend
• Offer is final and closes 11 April 
• Cash settlement to occur within five days of lodgement of Acceptance Form 

CIMIC Group Limited (‘CIMIC’ or the ‘Group‘), an ASX200 company, formerly Leighton Holdings, provides construction, mining, engineering and maintenance services to the infrastructure, resources and property sectors. More recently, the Group has established itself as the market leader in Australian renewables projects. Today, CIMIC employs 31,000 people and operates in more than 20 countries. CIMIC Group comprises well established businesses and brand names including CPB Contractors, Leighton, Theiss and UGL. Pacific Partnerships established by CIMIC in 1994 invests in, develops and manages infrastructure assets under Public Private Partnership (‘PPP‘) structures. Pacific Partnerships has delivered more than 30 PPPs for a value of close to $60 billion since the late 1990s. 

CIMIC Directors recommend HOCHTIEF Offer 

The Independent Directors of CIMIC have today unanimously recommended that shareholders accept HOCHTIEF’s final unconditional Offer price of $22 cash per CIMIC share. The Independent Directors intend to accept the offer for the shares they control. The recommendation follows HOCHTIEF’S unsolicited takeover offer launched on 23 February 2022. At the time of the Offer, HOCHTIEF owned 85 percent of CIMIC shares and the Offer price represented a 33 percent premium to the previous closing trading price of CIMIC shares. 

This final Offer price follows the receipt of the Independent Expert’s conclusion that the Offer is fair and reasonable for CIMIC shareholders. The Independent Expert assessed the estimated market value of CIMIC shares to be in the range of $19.26 to $25.05. This is a mid-point valuation of $22.15.

The Offer price has been declared unconditional and final by HOCHTIEF, which means it cannot be increased, unless a competing proposal is made by another company. This is highly unlikely because HOCHTIEF owns 85.1 percent of CIMIC, as of 22 March. The Offer closes on April 11, and cash settlement will occur within 5 days of the shareholder Acceptance Form being received by the CIMIC share registry.

On February 10, CIMIC declared an unfranked Final Dividend of 36 cents, payable on July 5. Shareholders accepting HOCHTIEF’S Final Offer price will not be entitled to receive this dividend. The Independent Expert took this matter into consideration before determining the assessed fair market value of CIMIC shares. 

CIMIC shareholders who do not accept the Final Offer price will have their shares compulsorily acquired by HOCHTIEF after the Offer closes. In the unlikely event that HOCHTIEF is unable to compulsorily acquire CIMIC shares, HOCHTIEF intends to de-list CIMIC from the ASX. De-listing will make it extremely difficult for CIMIC shareholders to realise value for their shares.  Accepting the Offer now ensures that shareholders receive their cash entitlement earlier rather than several weeks after the Offer closing date of 11 April. 

This Post Market Wrap is presented by Kodari Securities, written by Michael Kodari, CEO at KOSEC.