Under The Radar, page-164

Western Australia-based mining services provider Perenti Global is understood to have revived attempts to embark on a deal with Macmahon Holdings in the past three months.The understanding is that Perenti approached Macmahon with a merger proposal several weeks ago. However, Macmahon was understood to have shied away from a deal due to Perenti’s debt pile.Since that time, Perenti is understood to have instead moved forward with a plan to buy or merge with $1.1bn listed mining services provider Imdex.Shares in Imdex rallied strongly last month, although they have fallen in recent days as some suspect any talks unfolding between the pair have gone cold.Market sources say Imdex has been ascribed a strong valuation from the market due to the intellectual property it has and is unlikely to have been keen on a tie-up with Perenti.At June, Perenti had $503m of net debt as it generated $77m annual net profit, down 30 per cent from the previous corresponding period.READ MOREerenti sounds out deal with rivals|Thiess runs ruler over rival MacaIts market value is $700m and many believe it has been undervalued by investors, although its share price has rallied in recent weeks.The discussion comes at a time when many believe consolidation in the mining services sector remains long overdue as companies across the sector trade at low values, despite booming commodity prices, which are set to continue.Investors are often deterred by their tight margins and at times high risks and limited earnings growth profile.DataRoom understands that CIMIC recently proposed to buy smaller listed contractor MACA for its mining services provider Thiess.However, MACA rejected the proposal.Some suspect that CIMIC will return to the negotiating table with a higher offer.MACA told the market on Monday that it was not currently party to any market transaction.Perenti has made earlier attempts to embark on a deal with Macmahon. As DataRoom reported a year ago, it was sounding out its rivals for a deal.Perenti is a result of a merger between Ausdrill and Barminco, which Ausdrill agreed to buy in 2018 in a cash-and-scrip deal worth $271.5m, creating the nation’s second-largest mining contractor.Its elevated debt level is a hangover from that deal.Last year, Perenti, which has recently been advised by UBS and Gresham, also looked at Downer’s mining assets.Perenti generates close to 50 per cent of its revenue from Africa.There has also been talk that Perenti would be a good acquisition target for CIMIC’s mining services provider, Thiess.This is given that it has low exposure to coal and Thiess is trying to reduce its overall exposure to coal, which is out of favour with investors conscious of the environment.Macmahon, which has a $430m market value, also has a relatively low exposure to the out-of-favour commodity.Mining services provider MACA operates mostly in the gold, iron ore and nickel sectors, which are all performing strongly.It also has a small civil services business.Market analysts say Perenti is compelled to make an acquisition because of its desire to reduce its overall exposure to Africa and increase the exposure to surface mining. But it would not want to increase exposure to coalmining.BRIDGET CARTERDATAROOM EDITORBridget Carter has worked as a writer and editor for The Australian’s DataRoom column since it was launched in 2013, focusing on capital markets, mergers and acquisitions, private equity and investment banking....