The letter from Sembawang outlined its proposal for completing a transaction, including provisions to conduct due diligence currently blocked by an existing deal between Macmahon and Leighton Holdings.

Sembawang said that based on information publicly available and subject to the outcome of due diligence investigations, the indicative purchase price for the construction arm of Macmahon’s business was $A38 million.

Sembawang set a deadline of 5pm Perth time tomorrow for a response, but Macmahon said it would be unable to make a decision by that time.

“Macmahon’s independent directors note that Sembawang’s proposals remain unsolicited, non-binding, incomplete and highly conditional,” the company said.

“Accordingly, Macmahon is not in a position to respond to the latest proposal by the deadline of 5pm (Perth time) tomorrow described in the letter.”

Sembawang proposed a due diligence period starting upon acceptance of the letter and ending on January 31. It said it intended to acquire all of the issued and outstanding ordinary shares of the entities in the Macmahon group structure that own the construction businesses pursuant to a share sale agreement.

The company said it would also consider an asset sale structure, similar to the existing Leighton deal.

Sembawang proposed executing a sale and purchase agreement prior to the end of the due diligence period, but said it could not determine the exact nature of assets to be acquired until it has completed due diligence.

Macmahon announced a deal with Leighton on December 24 for the sale of the majority of its construction business for $20 million, retaining a few projects nearing completion. Shareholders are set to vote on that deal in February.

Sembawang threatened legal action against Macmahon earlier this week to force the company to consider its offer in addition to the deal it already struck with Leighton.

The company also released a series of emails between its CEO Richard Grosvenor and Macmahon CEO Ross Carroll to show Sembawang had expressed interest in purchasing the construction business prior to the Leighton deal.

When asked whether the possible legal action and email release had soured relations between the companies, Sembawang said Macmahon needed to consider its offer regardless.

“We believe that Macmahon’s board has a fiduciary duty to consider our higher offer,” a company spokesman said.

“We trust that Macmahon’s board will act in the best interests of the company’s shareholders.”

While Macmahon said it could not make a decision by tomorrow evening, it did not entirely shut down the possibility of negotiating a deal with Sembawang.

“In the circumstances, Macmahon’s independent directors propose to request further clarification from Sembawang to make a proper assessment of the merits of the proposals,” Macmahon said.

Macmahon shares were down more than 5% to 26.5c.

This article first appeared in ILN's sister publication MiningNews.net.