The Macmahon Holdings Ltd (ASX: MAH) share price has jumped 8% after announcing an acquisition.
Macmahon offers mining and civil infrastructure services throughout Australia, New Zealand and Southeast Asia.
Its abilities across surface mining, underground mining and civil infrastructure has established the company as a leading contractor for resources, non-resources, public infrastructure and renewables projects across a range of locations and sectors.
Agreed deal to acquire Aspect Engineering Solutions
The company announced today that it has executed an agreement to acquire Aspect Engineering Solutions for an enterprise value of $75 million on a debt-free and cash-free basis.
Macmahon said the acquisition helps expand its service offering, adding front-end engineering, detailed engineering, project delivery, minerals processing, and operations and maintenance capabilities.
The ASX share also said the transaction directly supports Macmahon’s FY27 to FY31 growth strategy. It also represents an ongoing opportunity to grow the business through acquisitions, with how Macmahon has a strong balance sheet.
The company described Aspect as a high-growth, low capital engineering and project business.
A combined business will be able to provide clients with an ‘integrated pathway’ from concept and feasibility through engineering, construction, mining, minerals processing and maintenance.
This move is expected to support earlier client engagement, longer client tenure, and increased exposure to low capital and higher margin revenue streams.
Aspect has Perth operations, along with a licensed Vietnam engineering and support hub, providing additional resourcing and design capacity.
Financial elements of the deal
In FY26, Aspect generated approximately A$75 million of revenue and A$15 million of EBIT (EBIT explained).
The enterprise value of A$75 million means it’s valued at 5x FY26 EBIT.
The acquisition is funded with A$30 million cash payable upfront, A$30 million of retention-linked payments over five years and potential contingent performance and outperformance payments up to a maximum of A$30 million.
The consideration will be funded from existing cash reserves, though it may decide to pay future retention payments and earn-out payments in the form of Macmahon shares rather than cash.
It’s expected to add to earnings per share (EPS) from day one, with an expected boost to EPS of approximately 6.2%.
Macmahon said the base case internal rate of return (IRR), before synergies, is 40.4%.
Final thoughts on the Macmahon share price
Clearly, the market is excited by this acquisition and I can see why.
The business will add to earnings and there are lot of financial and operational synergies between the two businesses. It makes a lot of sense.
If it can integrate the acquisition effectively, its earnings could significantly rise from its existing base.
I’d be a very happy shareholder, if I owned shares. But, I don’t and it’s not the sort of business in an industry I’d buy for my own portfolio.
