This means the media-shy company formerly known as Leighton Holdings is no longer required to disclose its performance to investors on the ASX.
For a company that has been criticized by minority shareholders for a lack of transparency in its balance sheet and dubious corporate governance, privatization has its merits.
Some of the more noticeable governance no-nos are that the CEO holds the dual role of Chair, which is not accepted good corporate governance practice in Australia, where the Chair should be an independent director. Another director has been on the board for 32 years, another for 11 years.
Given his prominent position in a number of high-profile state government infrastructure projects, Cimic definitely doesn’t want bad publicity and governments starting to ask questions.
When the takeover bid was submitted at a premium of 30 percent, ACS explained with a corporate simplification: “We have a publicly traded company [in Spain]owned by another public company [in Germany]which in turn owns another listed company [in Australia]and they all have construction and some concession companies.”
The $22-per-share offer could also be the price of convenience — and privacy — as the Middle East pullback began to get messy.
I wrote a column in December The Australian Financial Report that Cimic was embroiled in a wage scandal stemming from the announced sale of its Middle East investment, BICC Group, to little-known UAE investment firm SALD in 2021.
Contrary to popular belief, the article stated that Cimic has not yet completed the sale of its 45 percent stake. It raised questions about Cimic’s ethics and why the sale was taking so long.
This triggered a 15 percent drop in the share price to $15.51.
Cimic’s Middle East business has been marred by years of losses, massive writedowns, including a $1.8 billion writedown in 2020, and a bribery and corruption scandal.
And though it owns 45 percent, it argues it never had managerial control. This is despite the existence of a 2016 internal shareholder agreement received from the Financial review which contains a clause indicating that Cimic did not play a passive role in the joint venture. It elected the managing director and the majority of the board.
Unpaid bills, questions remain
In 2021, SALD obtained management control of the BICC joint venture for a sale price of 1 dirham (37¢). It was Cimic who poured $130 million into the BICC deal as part of the sale agreement.
A year after the announced sale, the deal is still pending. Under normal circumstances, this would make investors nervous. But February’s takeover bid allayed investor concerns.
But the manner in which Cimic is exiting its BICC Middle East joint venture leaves a lot to be desired.
Up to a year of unpaid wages for hundreds of foreign workers – many stranded in labor camps and without enough money to pay for groceries or bills, along with some long-time Australian expats unable to return home – cannot be ignored.
Cimic tried to hide behind new owner SALD, saying that “all rights, responsibilities and duties in BICC were transferred to SALD” while it was completing the share transfer.
However, the negative publicity that flared up again in March prompted a quick resolution.
On Friday, most workers confirmed they had been paid. A worker representing hundreds in Qatar said: “There are many happy and smiling people in Qatar who have their last feelings and plane ticket ready to go back to their families in their home country.”
Most workers in the UAE have also been paid, with only two remaining. Cimic said funds have been set aside for them.
While the pay scandal was largely worked up, the subcontractors weren’t so lucky, owing hundreds of millions of dollars.
In Dubai, Al Rawda, a painting and decorating contractor for the family, owes more than $5 million for 12 projects. The father says he continues to write to Cimic, BICC and SALD but has received no reply.
Another contractor, Abu Dhabi-based Al Nasr Contracting Company, a family business employing 5,000 people, is owed more than $23 million from two key projects, the Abu Dhabi Airport and the ZADCO offshore housing project, which are scheduled for 2017 go back
After going through a lengthy court case and winning, Al Nasr CEO John Helou says he has yet to receive the money. The last case was won in December 2021.
“We tried calling them on their phone number and they shut us off completely and asked us to coordinate solely with their UAE staff, who in turn do not answer or respond to any calls or inquiries,” he says.
Helou says the business is on the verge of collapse. “I have a very hard time accepting that a public company can do things like this in another part of the world and get away with it.”
He believes the sale of BICC to SALD for 1 dirham was part of a plan to ditch all responsibilities and sell it to a company with too few assets for anyone to make any claims.
“That way, they can write off all of their debt for pennies,” he says. “It’s too far away from Australia and accordingly [has] no impact on their stock price while companies like ours are in an existential struggle for their legal rights.”
Potential for “criminal” prosecution
When asked about the hundreds of suppliers who were owed money, Cimic tried to distance themselves.
“While we acknowledge the concerns of suppliers and subcontractors, any business matters related to a company’s dealings with a BICC group company must be resolved directly by the contracting parties and in accordance with the relevant contract,” said a Cimic spokeswoman.
Local banks are also believed to be owed hundreds of millions of dollars — an amount that could blow up if existing projects don’t complete successfully.
But Qatar have the biggest complications. Leighton Contractors Qatar, a company owned by Cimic and a local partner, collapsed in July 2020 and court-appointed liquidator Fatima Almass Al-Hamad has called the exit an abandonment.
“The administrator is investigating a number of violations of Qatari legislation by former LCQ management, which will be reported to the relevant authorities,” she said.
“This was a few years ago and could result in criminal prosecution under Qatari law.”
Cimic may be desperate to get rid of the stink of his Middle East business, but the consequences have a long way to go. Things aren’t looking good for a company that’s winning a lot of work from state governments for big infrastructure projects.