Decmil Group Limited (ASX: DCG) shares are catching the eye on Tuesday.
In morning trade, the ASX mining services stock is up 65% to a 52-week high of 28 cents.
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Why is this ASX mining stock rocketing?
Investors have been scrambling to get hold of the company's shares this morning after it received and accepted a takeover offer from Macmahon Holdings Ltd (ASX: MAH).
According to the release, the two parties have entered into a scheme implementation deed under which Macmahon will acquire 100% of the issued share capital of Decmil Group by way of inter-dependent schemes of arrangement for a cash price of $0.30 per share.
This represents a 76% premium to where the ASX mining stock last traded.
The transaction will be subject to the satisfaction of certain conditions. This includes the independent expert's report, approval by Decmil shareholders, and by the court.
In addition, Macmahon intends to acquire all Decmil redeemable convertible preference shares on issue for the aggregate of 34.3 cents per share via a separate, inter-conditional, contemporaneous scheme of arrangement.
Decmil board recommends the deal
The Board of Decmil has unanimously recommended that its shareholders vote in favour of the schemes. This is in the absence of a superior proposal and subject to the independent expert's report.
Furthermore, Decmil's major shareholders Thorney Group and Horley, have also indicated their support for the transaction. They have confirmed that they intend to vote in favour of the schemes, subject to the same qualifications.
Thorney Group and Horley together hold 26.7% of the ordinary shares and 38% of the preference shares outstanding.
Macmahon shares tumble
The news doesn't appear to have gone down well with Macmahon shareholders. Its shares are down a sizeable 8% in morning trade.
However, management believes the deal makes a lot of sense. It highlights that it is "consistent with Macmahon's strategic focus of achieving continued earnings growth while diversifying earnings into the less capital intensive civil infrastructure business."
It also feels that the transaction "offers a strategic fit, enhances and accelerates earnings diversification, with financial metrics that are compelling for Macmahon shareholders."
Whereas over at Decmil, its board believe the offer is too good to turn down. The ASX mining stock's chairman, Andrew Barclay, stated:
While the Decmil turnaround is starting to gather pace, Macmahon's all-cash offer at a strong premium to Decmil's current share and redeemable convertible preference share prices provides our securityholders with both certainty and accelerated value today that Decmil's position as a standalone company cannot be guaranteed to provide.
