Perenti to absorb local competitor

Established Western Australian contractor Perenti Group plans to acquire Canning Vale-based DDH1 in a deal that prices the target at more than $400 million.  

Under terms of the proposed transaction DDH1 shareholders will be offered 12.38 cents cash plus 0.7111 Perenti shares for each one held, valuing the target’s shares at about $1.01 apiece. Overall the deal has DDH1 priced at about $410 million.

Drilling specialist DDH1 has been on the ASX since 2021 and has a couple of acquisitions under its belt, buying counterpart Swick Mining Services several months after listing and Ranger Drilling in 2019 when it was private.

It has amassed an inventory of about 190 drill rigs since being founded in 2006.

Perenti is the fifth biggest mining services business in the state, according to Data & Insights, and the combined group could have the scale to join the ASX 200.

DDH1’s directors have recommended the deal go ahead and estimated about 38 per cent of shares on issue intend to vote in favour of the deal. That includes 20 per cent owned by global asset manager Oaktree.

Another two board members from DDH1 will join Perenti as part of the merger.

Prominent WA company director Diane Smith-Gander will move over to the Perenti board, which is chaired by Rob Cole, as will mining sector director Andrea Sutton.

Perenti chief executive Mark Norwell and chief financial officer Peter Bryant will remain their respective roles following the transaction.

“The long-term outlook for a sustained production cycle needs increased drilling spend to ensure mining reserves are not diminished, and drilling is becoming more complex, resulting in larger programs and demand for specialist services,” Mr Norwell said regarding on the deal. 

“DDH1 is a highly respected tier one global operator, with significant capabilities across a complete range of specialised surface and underground drilling services, that are complementary to our existing clients and service offering.”

DDH1 chief executive Sy Van Dyk will lead the broader group’s new drilling services division.

He said the proposed transaction paved the way to create one of the leading contract mining services groups on the ASX.

“This represents a transformative opportunity for all DDH1 stakeholders, enabling them to participate in the additional upside that comes from being part of an enlarged and dynamic mining services company,” he said.

“The strategic fit between Perenti and DDH1 is exceptional, and our combined expertise will enhance our value offering to clients and employees alike.”

Investment bank UBS and Johnson Winter Slattery's Perth office have been advising Perenti on the transaction. The pair previously consulted on Austin Engineering's acquisition of Queensland-based mining equipment manufacturer Mainetec.

DDH1 is being advised by MA Moelis Australia and Clayton Utz.  

Shares in Perenti have slipped more than 9 per cent on the news to trade at $1.16, meanwhile DDH1 shares were up close to 7 per cent at 92 cents.