CIMIC Group Limited (ASX:CIM) announced a share buy-back program of 10 per cent of its fully paid ordinary shares over the next 12 months. The company also previously announced that it was rewarded an extension of its existing mining contract worth 1.3 billion and its intentions to fully acquire Devine Limited.
According to CIMIC, the on-market buyback is aimed to improve shareholder returns, enhance capital efficiency, and maintain sufficient balance sheet flexibility to pursue future growth and investment opportunities.
CIMIC will fund the buy-back through its existing cash balances and working capital finances. The company showed confidence in its balance sheet position, cash flow generation and its approach to capital management.
The buy-back will start from 29th December, 2015 but the company said that the time and number of shares purchased will depend on the CIMIC share price and market conditions. It also mentioned that there is no requirement for a shareholder approval since the buy-back will be within the ‘10/12 limit’ permitted by the Corporations Act.
Thiess Awarded Extension Worth $1.3 Billion
CIMIC’s mining contractor Thiess was awarded a contract extension on 11th December 2015 which is worth $1.3 billion in revenue and is situated at Lake Vermont Coal Mine, near Dysart in Central Queensland. The three-year extension will allow Theiss’ turnkey mining operations to continue until December 2021.
CIMIC to Acquire Devine Limited
CIMIC originally owned 50.63% of Devine Limited and has been a major shareholder of the company for more than 8 years. The company recently announced a takeover proposal for Devine, to own the rest of the 49.37% of its shares at an offer price of $0.75 per share. This acquisition targets to protect Devine’s shareholder returns in the light of its recent profit downgrade and rapid deterioration in its performance.
After completing the takeover, CIMIC will reconstitute Devine’s existing board of directors, conduct a strategic review of its operations, and appoint a new Chief Executive Officer to lead the new strategy. On 10th December, 2015 Devine accepted the proposal in the ‘absence of a superior’ bid. The company is attracted to CIMIC’s offer as it represents a premium to its recent market prices and that CIMIC may be able to exercise great influence after the acquisition.
CIM last traded at $22.3 as at 10:34 AM (AEDT) and is down 0.91% for the year. The stock has lost approximately 14.5% since 10th November, 2015, when it announced its intention to acquire the rest of Devine’s shares.
Author: Imran Valibhoy
Dec 14, 2015
Since Joining the firm in 2006, Imran has worked on a range of M&A and Capital Market transactions in the natural resources, mining as well as projects in the renewable energy sector. Prior to joining Wise-owl, Imran worked at Euroz Securities in Perth, aiding in the advisory and valuation of companies in the mining and industrial sectors in Australia. Imran has a Masters in Banking & Finance from City University's Class Business School in London and a Bacheloor degree in Commerce from UWA.