“We have delivered operationally in FY18 and the Barminco transaction would broaden our strategic footprint to be Australia’s clear #2 mining services company.”
AUSDRILL’s “compelling” $271.5 million acquisition of underground mining contractor Barminco would create Australia’s second largest mining services company.
Ausdrill will acquire Barminco – its current partner in the lucrative African Underground Mining Service (AUMS) joint venture – in exchange for 150.7 million Ausdrill shares and $25.4m in cash; equivalent to an equity acquisition price of $271.5m.
Once the transaction is completed, Barminco vendors will own about 22.1 per cent of the enlarged Ausdrill, with experienced company director and current Barminco non-executive chairman Keith Gordon joining the Ausdrill board.
The acquisition announcement accompanied a set of outstanding full year results from diversified mining services company Ausdrill, including a year-on-year net profit increase of 95.7 per cent to $61.1 million.
This strong result was underpinned by repeat mining clients and new contracts, with more than $500m in contract extensions and new work secured over the past year.
“We have delivered operationally in FY18 and the Barminco transaction would broaden our strategic footprint to be Australia’s clear #2 mining services company and set in place a balance sheet with the capacity to achieve sustainable and profitable growth,” Ausdrill executive chairman Ian Cochrane said.
Based on the level of work currently in hand and expected contract renewals, Ausdrill was targeting 20 per cent to 30 per cent underlying profit growth for FY19, before taking into account the proposed acquisition.
The new-look, post-acquisition Ausdrill was expecting estimated annual revenue of $1.8 billion across a more diverse range of customers and geographies.
Barminco chief executive Paul Muller said Barminco and Ausdrill were a great fit, with the businesses providing complementary services and having worked together for a decade through the AUMS joint venture.
“By bringing these two businesses together and creating Australia’s second largest mining services company, we will be able to provide a broader range of services for our customers and generate additional opportunities for our employees,” he said.
“Barminco had a strong 2018 financial year and our focus is to continue safely delivering results for our customers.”
For the year ended 30 June Barminco reported a $50.665m profit; a huge turnaround from a $93.771m loss the year prior.
The transaction is subject to several conditions precedent, including Ausdrill shareholder approval.
Completion is anticipated for 31 October 2018, but this date is subject to change.