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Perenti share price on watch after responding to Downer EDI M&A speculation

The shares of both Downer EDI Limited (ASX: DOW) and Perenti Global Ltd (ASX: PRN) will be on watch on Wednesday amid some M&A speculation.

What is the speculation?

According to the AFR, the auction for Downer EDI’s mining services business is getting close.

The media outlet has reported that binding offers from strategic and private equity bidders need to be submitted by the end of the week to Downer EDI’s adviser and Macquarie Group Ltd (ASX: MQG) subsidiary, Macquarie Capital.

Downer EDI is believed to be looking for offers in the region of $700 million for the mining services business, with Perenti rumoured to be among the frontrunners.

Perenti response.

This morning Perenti responded to the media speculation by advising that it considers different M&A opportunities from time-to-time. It then confirmed that it is currently giving consideration to the potential purchase of Downer EDI’s mining services division.

However, it doesn’t appear to be interested in paying $700 million for the business.

Perenti’s CEO, Mark Norwell, said: “The process is ongoing and Perenti would only put forward an offer to acquire the business if it were to align with its strategy and deliver value for the Company’s shareholders. In particular, Perenti notes that the transaction value speculated in the article is significantly above the level Perenti may consider offering and Perenti would only pursue a transaction that was EPS accretive.”

Mr Norwell went on to advise that “if a transaction is agreed with Downer EDI, Perenti would consider a range of funding options and if an equity raising was to be pursued it would be structured as an entitlement offer only.”

Though, the company warned that there is no certainty that a transaction will eventuate. It will keep the market informed in compliance with its continuous disclosure obligations.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.