This article is from the Australian Property Journal archive
CIMIC boss Marcelino Fernández Verdes is determined to clean out the Devine board regardless of whether the developer accepts the takeover offer or not.
Cimic, which owns 50.63% in Devine, launched a takeover bid to acquire the remaining Devine it does not already currently own at 75 cents per share.
The offer represents a 31.3% premium to the volume weighted average price of shares in Devine since the company’s profit downgrade on 22 October 2015 of 57.1 cents per share.
However it is below the 52-week high share price of $1.07.
The takeover bid saw Devine’s share price soar 25.62% to close at 76 cents yesterday.
In a statement, Cimic said it was prompted to act following a series of events at Devine.
“As a major shareholder in Devine for more than 8 years, CIMIC has been supportive of it management and board.
“However the recent profit downgrade and rapid deterioration in Devine’s performance have caused the CIMIC board to conclude that decisive action must be taken to ensure that the value of Devine is protected for all shareholders,”
The Devine board issued a statement, advising shareholders to take no action until it considers the proposal.
Cimic said it is seeking the support of the Devine board for the offer. However, it is not a condition of the takeover bid.
Furthermore Cimic said it intends to reconstitute the Devine board and conduct a strategic review of Devine’s businesses as well as appoint a new CEO to lead the new strategy.
“CIMIC will pursue the above changes to Devine irrespective of the outcome of the offer,” the company said.
The decision by Cimic, formerly Leighton Holdings, to takeover Devine is in stark contrast to the previous decision made to sell its stake in Devine.
In June last year Leighton began an expressions of interest process to sell its 50.6% interest in Devine.
After fielding interests from local and offshore parties, Leighton pulled the plug on the sale after Devine formed a partnership with Japanese builder Daikyo Incorporated, to jointly develop apartment and mixed-use projects in Australia.
Cimic has been involved with Devine since 2007, when Leighton boss Wal King acquired a 40% stake in Devine and later bought out the founders David Devine and Ken Woodley in 2010.
Leighton paid $95.6 million in 2007 for the 40% stake totalling 94.7 million shares at approximately $1 per share. In 2010, Leighton increased its stake in the company at 25 cents per share.
However after Leighton took control, there has been criticism from shareholders about the performance of Devine and how the company has not taken advantage of the recovery in the residential property market.
And in October last year, Leighton stepped in to guarantee Devine’s debt facility with ANZ Bank after the developer forecast a loss before tax result of $15 million for first half year of 2014. As a result, Devine reviewed its portfolio and immediately sold off a number of projects.
Most recently, Devine was rocked by the resignations of its CEO David Keir, general manager of constructions Mike Tucker following revelations that the company would not deliver a profit due to a costs blowout.
Devine revealed it would not meet its previous guidance profit before tax of $10.0 million to $13.0 million for the 12 months to 31 December 2015. Instead, it is expecting a nil profit result for FY15.
The expected result was blamed on trade letting losses of approximately $8.0 million on two contracts in Devine Constructions.
Australian Property Journal
