17/08/2009 - 11:56

Ausdrill and Brandrill set to merge

17/08/2009 - 11:56

Bookmark

Save articles for future reference.

Mining services companies Brandrill and Ausdrill have proposed a friendly scrip merger to create whay they say will be a larger, more diverse company able to better serve existing clients and with greater financial capacity to fund future growth.

Ausdrill and Brandrill set to merge

Mining services companies Brandrill and Ausdrill have proposed a friendly scrip merger to create whay they say will be a larger, more diverse company able to better serve existing clients and with greater financial capacity to fund future growth.

Under the terms of the merger, Brandrill shareholders will receive one Ausdrill share for every 14.5 Brandrill shares held.

The merger will be implemented via a scheme of arrangement and is subject to a number of conditions, including Brandrill shareholder approval.


Based on the closing prices of the two companies on Friday 14 August, the proposed merger terms equate to a value of 9.5 cents per Brandrill share.

This is 77 per cent above the volume-weighted average price of 5.4 cents per share for the 30 days prior to the announcement.

It is also 44 per cent above the closing price of 6.6 cents per share on 14 August 2009.

It is intended that Brandrill management and workforce will be integrated into the existing Ausdrill structure

 

Full announcement below:

 

BRANDRILL MERGER WITH AUSDRILL TO DELIVER DIVERSIFIED MINING SERVICES GROUP

 

The Directors of Ausdrill Limited (ASX: ASL) and Brandrill Limited (ASX: BDL) are pleased to today announce a proposed merger of the two businesses, under which Ausdrill will issue shares to Brandrill shareholders in exchange for all of the shares in Brandrill.

The combined group will create a leading integrated mining services company, with a strong and complementary range of Australian and international business operations. This larger, more diverse company will have a better ability to serve existing clients and a greater financial capacity to fund future growth.

The merger will allow both Ausdrill and Brandrill shareholders to benefit from the expected growth in a stronger combined core business in Australia and from expansion of Ausdrill's African operations.

Ausdrill's Chairman, Terry O'Connor said today:

"This is a logical and compelling merger resulting in a stronger combined entity, benefiting both Ausdrill and Brandrill shareholders. The combined group brings together two established and experienced mining services operators, and provides benefits of increased scope and scale. We have a positive outlook for the industry, and look forward to continuing to grow our business for the benefits of our shareholders, our enlarged staff and our customers."

Brandrill's Chairman, Vince Pendal said:

"We believe that the combination of Brandrill with Ausdrill's businesses will create considerable additional value and this is expected to provide accelerated upside for our shareholders. This merger is the right agreement with the right company."

The Directors of Brandrill unanimously recommend that Brandrill shareholders vote in favour of the merger in the absence of a superior proposal. Subject to the same qualification, each of the Brandrill Directors intends to vote in favour of the merger in relation to shares held or controlled by them.

Merger Terms
Under the terms of the merger, eligible Brandrill shareholders will receive one Ausdrill share for every 14.5 Brandrill shares held at the record date for the merger (Merger Consideration). The merger will be implemented via a scheme of arrangement and is subject to a number of conditions, including Brandrill shareholder approval. A Brandrill shareholders' meeting is expected to be held in late November to seek shareholder approval for the merger.

Brandrill Share Premium
Based on the closing prices of the two companies on Friday 14 August 2009[1], the proposed merger terms equate to a value of 9.5 cents per Brandrill share, representing an attractive premium of:

- 77% to the volume-weighted average price (VWAP) of 5.4 cents per share for the 30 days prior to the Announcement Date; and

- 44% to the closing price of 6.6 cents per share on 14 August 2009.

Merger Benefits
Upon implementation of the merger, the combined group will provide Brandrill shareholders with a number of important benefits in addition to the headline premium noted above, including:

- Diversified exposure - Brandrill's drill and blast and exploration drilling business and its DT Hi-Load truck body business will fit well in the wider Ausdrill group which includes:

− Ausdrill drill and blast and exploration drilling businesses in Australia;

− Ausdrill's growing Australian contract mining and plant hire business;

− African Mining Services - the full range of contract mining services in Africa;

− Diamond Communications - telecommunications and utility construction and maintenance;

− Drilling Tools Australia - manufacturing drill consumables; and

− Supply Direct -procurement and logistics.

- Operational Synergies - The combination of Ausdrill's and Brandrill's complementary drilling businesses will create significant opportunities for operational synergies. It is intended that Brandrill's drilling businesses will use drilling consumables manufactured by Ausdrill's Drilling Tools Australia business and benefit from the increased buying power of the combined group. It is also expected that the emerging DT Hi-Load truck body business has the potential to supply truck bodies to Ausdrill's growing mining services business.

- Financial strength - the combined balance sheets of both Companies will result in a stronger merged entity with greater capacity to pursue further growth opportunities.

- Ongoing participation - through the equity participation, Brandrill shareholders will not only retain exposure to the assets, operations and growth prospects of Brandrill, but will also be able to participate in the growth prospects in the combined group's other businesses as well as the synergies which are expected as a result of the merger.

- CGT rollover relief - Eligible Brandrill shareholders should be entitled to Australian capital gains tax (CGT) roll-over relief in respect of their Merger Consideration. CGT roll-over relief would enable eligible shareholders to defer any potential CGT liability, which may be attributable to the Merger Consideration, until they dispose of the new Ausdrill shares.

The directors of both companies believe that the merger will enable it to offer an even better range of services to existing and new clients.

Board, Management and Workforce
It is intended that Brandrill management and workforce will be integrated into the existing Ausdrill structure with the objective being to maximise the benefits that will flow from combining the skills, expertise, experience and relationships of the two companies' employees.

It is proposed that current Brandrill director, Mr Mason Hills, will join the Board of Ausdrill.

Merger Details
Ausdrill and Brandrill have signed a Merger Implementation Agreement ("MIA") under which each party has agreed to take the steps necessary to implement the merger.

A summary of the conditions to the merger and certain other key provisions of the MIA is contained in Annexure A to this announcement.

Timetable
An Information Booklet will be provided to Brandrill shareholders in connection with the merger. This will include an independent expert's report assessing whether the merger is in Brandrill shareholders' best interests.

It is expected that a meeting of Brandrill shareholders will be held in late November 2009 to vote on the merger. If the merger is approved, final implementation is likely to occur in December 2009.

Ausdrill is being advised by Cochrane Lishman and Argonaut Capital Limited. Brandrill is being advised by Gresham Advisory Partners and McKenzie Moncrieff Lawyers.

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options