25/06/2008 - 11:21

Haddington to acquire business for $11m

25/06/2008 - 11:21

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A week after dropping its acquisition of Adelaide-based drilling company Underdale Drillers, base metals explorer Haddington Resources is now eyeing Brisbane company Pheonix Drilling Services.

A week after dropping its acquisition of Adelaide-based drilling company Underdale Drillers, base metals explorer Haddington Resources is now eyeing Brisbane company Pheonix Drilling Services.

Keeping in line with its expansion strategy into drilling services, Haddington has proposed to acquire Pheonix for a total of $11 million, subject to due diligence and required approvals.

If all goes to plan, Haddington will fund the acquisition through a cash payment of $7 million and the issue of $1 million worth of its shares. A further payment of $3 million will be made 12 months after settlement.

Haddington expects the Pheonix business to add around $11 million each year in revenue.

Below is the full announcement:

Haddington Resources Ltd will continue with its strategy for expansion of its drilling services business through the acquisition of Brisbane based drilling company, Phoenix Drilling Services, subject to completing due diligence and obtaining required approvals.

The total acquisition cost of Phoenix will be $11.0 million. The acquisition cost will be made through a payment of $7.0 million and the issue of $1 million worth of Haddington shares at settlement and payment of $3.0 million 12 months after settlement. The cash component of the acquisition will be funded out of debt and from Haddington's existing cash reserves. Completion will take place within 90 days.

Haddington expects the Phoenix business to add approximately $11 million per annum to its revenue base and contribute approximately $3.5 million in EBITDA per annum.

Haddington currently has 7 drill rigs through its subsidiary Haddington Drilling Services. Phoenix has 7 drill rigs operating in the coal fields of central Queensland and is also engaged in drilling in the coal seam gas industries using larger drilling equipment and more specialised drilling techniques. There are obvious synergies in the merging of the two companies that are both Brisbane based, have similar operating areas, similar industry focus and have the potential for cost saving through streamlined management.

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