DDH1 Drilling has launched a friendly takeover of counterpart Swick Mining Services, sending the target's shares up by more than 20 per cent.
The offer is a 32 per cent premium to Swick's closing price of 26.5 cents on October 6, and a share price high since 2013.
The deal will not affect Swick's planned demerger and listing of its mineral technology business, Orexplore, which is scheduled for this calendar year.
Swick's shareholders will receive about 84.2 million shares in DDH1, as well as shares in Orexplore, equating to a 19.7 per cent interest in the merged group.
The Western Australian companies generated a combined $445 million in revenue in fiscal 2021 and $103 million in underlying earnings, or EBITDA.
A binding scheme implementation agreement is expected to be signed shortly.
Mr Simpson said the deal made strategic sense and combined high quality, experienced expertise in underground and surface drilling.
About 60 per cent of the merged group will focus on surface drilling and the remaining 40 per cent on underground.
“For Swick shareholders, the proposed transaction will enable them to benefit from their ownership in the enlarged group, while also realizing the value of the Orexplore business in the form of a new ASX listing,” Mr Simpson said.
Founded in 1997, South Guildford-based Swick provides engineering, underground diamond drilling and mineral technology services to the Australian, American and European mining sectors.
Mr Swick said the business was now the largest underground drilling contractor in Australia.
“There is a strong commercial logic in combining the DDH1 and Swick businesses and being able to offer our customers a complete range of high quality and innovative mineral drilling services from the discovery phase, through to mining and completion,” he said.
“I am very proud that the team at Swick have built a business that has been recognised and valued by another high-quality peer.”
DDH1, which listed on the ASX in March, expects to maintain Swick as a standalone division “to ensure continuation of the successful branding and customer service focus”.
The company intends to fund the $15.7 million in expected transaction costs using existing cash and credit facilities.
“We have enormous respect for what Kent Swick and his team at Swick have delivered to their customers over the years and are very excited about their potential growth as they deploy their engineering innovations and services which demonstrate a deep understanding of their customer requirements,” he said.
Swick closed up 20.4 per cent on Tuesday to trade at 32 cents, its highest share price since August 2017, while DDH1 closed up 6.9 per cent to trade at $1.24.