SYDNEY Spanish-controlled engineering contractor CIMIC Group Ltd (CIM.AX) said on Monday it will offer A$525 million ($400 million) for Australian rival UGL Ltd (UGL.AX), seizing on the target company's shareprice collapse amid a mining downturn.
Sydney-listed CIMIC, mostly owned by Spanish-owned German company Hochtief AG (HOTG.DE), said it will offer A$3.15 per share for UGL, a 47 percent premium to its last close, but still less than half its A$7-plus levels in 2012 before the impact of a commodity downturn.
"CIMIC believes UGL's competencies are complementary to CIMIC's existing operations or enhance CIMIC's capabilities in new activities," CIMIC, formerly known as Leighton Holdings, said in a statement.
UGL said in a statement that it would convene a board meeting to consider the offer and urged shareholders not to take any action in the meantime. It added that CIMIC had bought 14 percent of its shares.
The offer, a far cry from the target company's A$1.2 billion market capitalization four years earlier, highlights the impact on the engineering sector of a downturn in mining due to weak commodity prices.
In June, UGL warned that delays at a large oil and gas project would hit profits, sending its shares down by a third in one day.
Following Monday's takeover offer announcement, UGL shares jumped 48 percent, their biggest one-day gain since listing, to be trading at A$3.17, just ahead of the offer price. The broader market was up 0.3 percent.
UGL in August posted its second consecutive yearly loss, a A$106 million net loss compared to a loss of A$303 million the previous year, and said a restructure would see the company return to profitability.
On Monday, CIMIC said it planned to conduct its own review of UGL's businesses to "drive operational efficiencies and improvements to project delivery and analyze the composition and value of UGL's assets."
($1 = 1.3187 Australian dollars)
(Reporting by Byron Kaye; Editing by Richard Pullin)