Japan’s Hitachi Construction Machinery Co has made a bid to buy Australia’s Bradken (BKN) for about $689 million, which barring a rival bid, looks like succeeding.
In a statement late Monday Bradken said Hitachi has made a cash offer for the mining services company at $3.25 a share, compared to the closing price of $2.43 and the all time high of $8.59 back in 2012 at the height of the mining investment boom.
Bradken’s board has unanimously recommended the deal to shareholders. It is the third bid for Bradken since late 2014. The proposed price is also at a significant premium to the attempt early in 2015 by KKR and local equity group, Pacific Equity to snatch control of Bradken at $2.50 a share which was a 36% premium to Bradken’s then share price.
But it is significantly lower than the $5.10 offered in late 2014 by Bain and Co of the USA, a bid rejected by the Bradken board.
Bradken chairman Phil Arnall said: "I am pleased to announce this Offer by HCM, which provides shareholders with an attractive premium. On successful completion, it lets Bradken, which has a proud history in mining and industrial services, join with one of the world’s largest machinery companies to form a premium global business."
Hitachi Construction Machinery will retain Bradken’s head office in NSW at Newcastle.
As usual, Bradken’s board support for the Hitachi bid is subject to no higher offer surfacing, as well as being subject to an independent expert’s report the offer is both fair and reasonable for shareholders.
In the year to June, Bradken posted earnings before interest, tax, depreciation and amortisation (EBITDA) of just $50 million, and foreshadowed no improvement in the year ahead, due to the subdued level of mine sector capital spending.
Earnings in the second half of the year were stronger than the first half, but any full revival is some way off. earjings this financial year will be similarly skewed to the second half.
As part of its renewed focus, Bradken has highlighted both the mining consummables market, the so-called ‘wear parts’ sector – both mobile and fixed equipment – along with the specialty forging market of north America as areas of focus. It had also hinted at ongoing unspecified asset sales as it seeks to strengthen its balance sheet and prepares for the lengthy downturn.
