Ausdrill blames slump on hedge fund

TAKEOVER target Ausdrill has blamed a fall in the company's share price on hedge fund selling after comments from suitor Macmahon that its bid was unlikely to succeed. Ausdrill said that it believes selling from hedge funds accounted for the "majority" of the "large number" of shares traded in the belief that Macmahon's offer would fail.

The drilling contractor's share price sank 20 per cent from a closing price of $2.50 on Tuesday to close at $2.00 yesterday.

Ausdrill chairman Terry O'Connor said the impact of hedge fund selling on the share price was likely to be "short term" and that the price did not reflect the group's excellent outlook and earnings.

Shares in Ausdrill gained nine cents to $2.09 by 10.41am (AEST), while Macmahon put on 1.5 cents to $1.815.

Macmahon is offering 1.65 of its own shares for every Ausdrill share, valuing the company at $511 million at Macmahon's previous closing price of $1.80.

Macmahon is targeting Ausdrill to gain a greater foothold in Africa and create a diversified mining contracting and civil construction company with a market capitalisation of about $1.4 billion.

Ausdrill managing director Ron Sayers again has lifted his stake in the company, purchasing 8.3 million shares at $2.50 each, or $20.75 million in total to increase his interest to 19.95 per cent.

The drilling contractor said the directors, together with shareholders who have stated they would not accept the takeover offer account for 33.2 per cent of Ausdrill's shares.

"We look forward to continuing to grow Ausdrill as an independent company for the benefit of our shareholders," Mr Sayers said.

Macmahon's takeover offer closes on September 29.



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