Key message: Clough and MRPL (M&R holding company Australia) have been put into voluntary administration. This pulls RUC into the administration process. Australia remains ringfenced from the Group.
- Murray & Roberts announced the proposed sale of Clough to Webuild cannot proceed and that Clough has been put into voluntary administration. Murray & Roberts Pty Ltd (MRPL) – the holding company in Australia – has also been put into voluntary administration.
- The intercompany loan between Clough and MRPL through the buy-out of Clough minorities in 2013 is what has now forced MRPL into administration. This shields the Group from any liability from Australia.
- However, RUC Cementation (the Australian part of the Mining division) falls under MRPL and becomes part of the administration process. RUC has a NAV of A$85m (R1bn).
- There are a number of permutations now:
- MRPL can cover all Clough creditors through the sale of assets and RUC can be extracted at no cost to MUR.
- MUR buys RUC out of the administration process as part of a settlement agreement for less that NAV.
- RUC is sold to cover MRPL creditors and MUR loses the full NAV.
- MRPL creditors include Clough liabilities to third parties and Murray & Roberts International (through a loan provided to MRPL to purchase RUC which is now due). This loan puts MUR in a reasonable position wrt the administration process.
- We estimate the value of RUC at approx. 30% of the value of the mining division. If we exclude RUC from our valuation, we get a Target Price of R5.20 (R8.50 incl RUC).
- Administration processes in Australia take a long time and are generally not favourable towards the construction sector, and the likelihood of MUR not being able to extract the full value of RUC is high. The main uncertainty lies in the magnitude of losses and claims against Clough and recoverability of any of its own claims.