Industrial testing and chemicals and services group, Campbell Brothers, has gone back on the prowl and is aiming at a small Perth testing company.
After building a world scale analytical business, Brisbane-based Campbell pulled its horns in a year ago (like so many other companies) and concentrated on keeping its existing businesses ticking over and in good shape.
But yesterday Campbell re-emerged on the hunt. It is looking for nearly $200 million in a rights issue and around $42 million of that is to be spent on buying energy and mining services provider PearlStreet Ltd for $42.1 million in cash.
Campbell Brothers will offer 56 cents per share for Perth-based PearlStreet, the largest non-destructive testing services provider in Australia, the Brisbane-based Campbells said in a statement to the ASX yesterday.
The offer represents a 79% premium to PearlStreet’s five-day volume-weighted average price of 31 cents up to the close on September 28, the day before PearlStreet said a private equity group would invest $23 million in the company.
That private group was understood to be Catalyst, but they appear to have been beaten to the punch by Campbell.
Campbell Brothers’ offer also is a 32% increase on Wednesday’s closing price of 42.5 cents.
PearlStreet shares surged 25 per cent to close 10.5c higher at 53c.
But then the board rejected the offer from Campbell just after the market closed, arguing it was better to remain listed and pursue growth opportunities.
The CEO of Pearl, Anthony Wooles owns 51% and had agreed to sell part of his holding to Catalyst.
Campbell shares were chased hard by investors yesterday; they ended up more than 5% at $31.15 a rise of $1.56 on the day.
To pay for it Campbell has launched a fully underwritten 1 for 6 renounceable rights issue to raise approximately $196.6 million.
The issue will be made at $22 a share, a 25.7% discount to the last closing price of its shares on Wednesday and a 22.8% discount to the Theoretical Ex-Rights Price.
It said the issue is fully underwritten by J.P. Morgan Australia Limited and RBS Morgans Corporate Limited.
"The proceeds from the Rights Issue will provide Campbell Brothers with the balance sheet flexibility to take advantage of strategic opportunities.
"Potential opportunities continue to be identified and Campbell Brothers are currently analysing these opportunities.
"Campbell Brothers also announced today that its wholly owned subsidiary, Australian Laboratory Services Pty Ltd, proposes to make a cash offer for all of the issued capital in PearlStreet Limited)."
Directors also lifted its first half FY10 net profit after tax guidance "to approximately A$38 million in line with previous guidance of A$35 – A$40 million".
Managing Director Greg Kilmister said in the statement that "Our customers activity levels are showing clear signs of stabilisation and improvement, which bodes well for volume throughput in our laboratories".
Campbell Brothers said the proposed offer for PearlStreet implies total consideration of approximately $86.7 million, comprising $42.1 million for equity and $44.6 million for net debt as at 30 June 2009.
"Perth-based PearlStreet is the largest Non Destructive Testing (NDT) services provider in Australia.
"It provides testing, inspection and asset care services to the energy, resources and infrastructure sectors.
"PearlStreet has over 500 employees across Australia, including engineers, scientists and technicians.
"The proposed offer will be subject to limited conditions, including a Board recommendation and a minimum 90% acceptance condition.
"Importantly, the proposed offer will not be subject to any finance or due diligence condition," Campbell directors said in the statement.
PearlStreet shareholders would also receive a final dividend of one cent per share in addition to the Campbell Brothers offer.
