Mining services company Macmahon (MAH) raised a few eyebrows with a takeover offer for Decmil (DCG) that is likely to proceed*. While Macmahon's share price was already up 58% for the year prior to the deal announcement, it was well received by investors. Decmil is cheap and comes with franking and tax losses that should be useful for Macmahon, but we are less enthusiastic.
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Decmil hasn’t made a profit for years and the engineering and construction sector it operates in is even tougher than mining services. Macmahon has only just fixed its own operational issues and doesn’t need to be taking on more problems. Returning cash to shareholders would have been our preferred path. The Macmahon investment added 2.1% to the Forager Australian Shares Fund returns during the last financial year, and we used the strength to reduce the Fund’s exposure and add a little to fellow mining services company Perenti (PRN), which hasn’t seen the same share price appreciation.
*Since the time of writing, the takeover of Decmil by Macmahon has been completed.
This is an excerpt from the Forager Australian Shares Fund section of the June Annual Report