West Perth-based company Imdex Ltd has taken another major step in its strategy to become a major global player in the drilling products and services market by entering into a $17 million agreement to acquire UK-based Chardec Consultants Ltd.
West Perth-based company Imdex Ltd has taken another major step in its strategy to become a major global player in the drilling products and services market by entering into a $17 million agreement to acquire UK-based Chardec Consultants Ltd.
This followed the $25.4 million purchase of Swedish company Reflex earlier this year and the $6.9 million acquisition of South African drilling fluids and chemicals business Samchem in July last year.
Imdex's specialist focus, under chairman Ian Burston and managing director Bernie Ridgeway, was reinforced by last year's sale of its minerals division.
"We've had a deliberate strategy of selling non-core assets and, in drilling products and services, concentrating on businesses that offer scale and have the ability to grow globally," Mr Ridgeway told WA Business News recently.
Chardec is described as the leading developer and manufacturer of borehole survey equipment for the exploration, mining, quarrying and construction industries globaly.
Imdex said Chardec's business focus will be widened to include the oil and gas industry, where Imdex is bulding its presence.
The benefits of the transaction include giving Imdex its own product development and manufacturing facilities.
Imdex noted that Chardec already develops and manufactures the Reflex range of products, and therefore this acquisition would be complementary to the Reflex purchase.
Funding for the transaction will be from a combination of internal resources and borrowings using existing banking relationships.
The full press release is pasted below:
Imdex Limited (Imdex) has taken another important step in its strategy of positioning itself as a global supplier of services to the mineral exploration and drilling industry.
Imdex has executed a Heads of Agreement to acquire the United Kingdom-based Chardec Consultants Limited (Chardec), the leading developer and manufacturer of borehole survey equipment to the exploration, mining/quarrying and construction industries globally.
Total consideration for the purchase is £6.815 million (A$17 million) payable over three years.
Chardec's innovative technology offers cost saving solutions through the use of electronic instruments to deliver borehole survey data accurately and in a timely fashion. Chardec also develops and manufacturers the Reflex Instrument range of products. On 19 April 2006, Imdex announced the proposed acquisition of the Reflex group of companies. The proposed acquisition of Chardec is complementary to that purchase.
The Chardec transaction:
- provides Imdex with its own product development and manufacturing facilities;
- facilitates expansion of intellectual property ownership;
- delivers significant cost savings contributing to better operating margins;
- strengthens the skill base of Imdex, enhancing its ability to develop products for existing and
new markets internationally; and
- provides an attractive financial return to the company.
The Chardec range of products is already well-known to Imdex. Ace Drilling Supplies (Ace), an operating unit of Imdex, has been a distributor of Chardec manufactured tools (via Reflex) in Australia and the Asian region since 2000. The transaction will help to further boost the market presence of Imdex.
Existing Ownership
Chardec is a privately owned company situated in East Sussex and registered in the United Kingdom.
Business Opportunities
The combination of the existing Imdex business with Chardec offers benefits that would not otherwise be available.
- The Chardec acquisition supports Imdex's vertical integration objectives to deliver a full range of products and services to the exploration and drilling industry while expanding into key markets such as oil and gas.
- The acquisition will provide additional research & development and manufacturing infrastructure. This infrastructure will enhance the ability of Imdex to develop and supply more profitable proprietary products and reduce the need for Imdex to acquire technology
from other suppliers.
- While Chardec is a leading manufacturer of down hole survey equipment globally, its business focus will be expanded with the help of expertise from Imdex to target the oil and gas sector, where Imdex already has a growing presence.
Financial Performance
Chardec's projected EBIT for the year ending 31 October 2006 is approximately A$4.5 million. The acquisition is expected to enhance company earnings immediately and boost the return on funds employed by the company. The profitability of Chardec reflects its investment in intellectual property and recognition by its customers that it is a technology leader in its field.
The Transaction Terms
The transaction is subject to various conditions including a detailed due diligence program. Subject to the satisfactory completion of these matters we would expect completion to occur on, or before, 31 July 2006. Imdex will pay the owners of Chardec ₤6.815 million (A$17 million) comprising ₤2.5 million (A$6.3 million) in cash at settlement and a further ₤4.315 million (A$10.8 million) over three years. Funding for the transaction will be from a combination of internal resources and borrowings using existing banking relationships.
Current Management
Imdex intends to retain the existing Chardec management and technical team to maximise the opportunities available in the mining and oil and gas industries globally.
