Engineering and construction giant CIMIC has palmed off half of its ownership of mining services company Thiess.
In its latest announcement, CIMIC Group said it had entered into an agreement to sell 50 percent of its ownership in Thiess to funds advised by UK funds management advisory firm Elliott Advisors at a price which implies a $4.3 billion enterprise value for the company.
Under the agreement, CIMIC will retain its remaining 50 percent whilst CIMIC and Elliott will jointly control Thiess in accordance with a shareholder agreement.
The transaction includes customary future share transfer options including a potential initial public offering or sale to a third party and an option for Elliott to sell its interest in Thiess to CIMIC between three and six years from completion.
Exercise of Elliott’s option would enable CIMIC to potentially repurchase the interest now being acquired by Elliott at the lower of today’s sale price or fair market value at that point in time, and benefits from a guarantee from CIMIC’s majority shareholder HOCHTIEF.
Part of CIMIC’s Mining and Mineral Processing unit along with minerals processing company Sedgman, Thiess delivers open cut and underground mining in Australia, Asia, Africa and the Americas, providing services to 25 projects across a range of commodities.
All up, it generates around $4.1 billion in annual revenues and has around 14,000 employees who operate more than 2,200 assets including plant and equipment.
Recent contract wins for the company include a twelve-month extension of a contract to deliver mining services to BHP Mitsubishi Alliance at its Caval Ridge mine in Queensland valued at $110 million, an eighteen month extension to its contract to provide a range of mining services to Glencore on its coal mine at Mount Owen in the Hunter Valle worth $340 million, a new load and haul services contract at the Manto Blancos mine operated by Mantos Copper S.A. in Chile and a five-year extension to its contract with Jellinbah Group involving mining service provision at the Lake Vermont Coal Mine in Queensland worth $2.5 billion.
As stated above, the price of the interest implies a $4.3 billion overall valuation for Thiess (based on 100 percent of the company subject to adjustments.
For CIMIC, the transaction will deliver between $1.7 billion and $1.9 billion in cash proceeds and will reduce its factoring balance by approximately A$700 million and CIMIC’s lease liability balance by approximately A$500 million.
The transaction is expected to generate a pre-tax gain for CIMIC of around A$2.2 billion, and a post-tax gain of around A$1.4 billion, subject to certain adjustments
CIMIC will retain a strategic interest in its core mining operations while maintaining a balanced and diversified business portfolio.
CIMIC Group Executive Chairman Marcelino Fernández Verdes said the sale would help Thiess to pursue further opportunities for diversification and growth.