Chilean group Sigdo Koppers and CHAMP Private Equity are investing $70 million in Bradken, an Australian mining services and equipment supply group hit hard by the decline in resources investment.
The consortium is also proposing a merger between Bradken and Sigdo Koppers’ wholly-owned subsidiary, the Magotteaux Group which provides services to global industries including mining, cement, quarrying, recycling and dredging.
Bradken says the $70 million, raised via redeemable convertible preference securities, will be used to pay down debt and increase operating flexibility.
The parties have agreed to work together during a 60- day exclusivity period to review the strategic and financial merits of a merger.
Bradken has been subject to a series of takeover moves in the last six months but the declining resources market has seen the company’s value fall hard and the deals fade.
Two private equity firms in January pulled out of a $900 million bid because of volatility in commodity and financial markets.
Bradken says the slowdown in mining activity, driven by a decline in commodity prices, has dampened demand for capital equipment.
“Operationally, miners have cut costs by deferring maintenance and are pursuing cost reductions from suppliers,” the company says. “Bradken has responded by restructuring its operations including foundry closures in high cost locations and reducing overheads to mitigate this effect and maintain its quality of earnings.”
Bradken expects full year EBITDA (earnings before interest, taxes, depreciation, and amortisation) of between $136 million and $138 million. Net debt is running at about $420 million.
However, Bradken expects write downs of between $135 million and $145 million, most of it in a newly formed mining and transport division.
Bradken shares are down 14% today to $1.475.