Transfield Services is raising nearly $300 million to help pay for a move deeper into the resources sector through the purchase of the Queensland-based resources services provider Easternwell Group for $575 million.
Transfield said in a statement to the ASX yesterday that it would pay for the purchase of the services provider to the mining, oil and gas sectors through a combination of debt and equity.
Transfield shares went into a trading halt prior to the announcement before the market opening yesterday, with the company then saying it would raise $271 million in new debt and $294 million through an accelerated non-renounceable entitlement offer at $3 a share.
Transfield shares closed at $3.50 last Friday so the issue is a 14% discount.
Toowoomba-based Easternwell would be expected to contribute more than $40 million in earnings before interest, tax, depreciation and amortisation (EBITDA) to Transfield for the six months ending in June 2011.
Easternwell employs more than 8,000 staff across Australia, with customers such as BHP Billiton, Cameco, Chevron, Rio Tinto, Santos and Woodside.
‘‘This acquisition is consistent with our stated strategic objective to expand our services and capabilities into adjacent sectors and to pursue higher value work,’’ Transfield Services chief executive Peter Goode said in a statement.
‘‘Acquiring Easternwell enable Transfield Services to build out its existing suite of operations and maintenance services to include higher margin technical services.
"In addition, an earn-out of up to $17 million is payable if certain earnings milestones are reached for the financial year ending in June 2012.
"The transaction is on a cash free and debt free basis and follows extensive due diligence on Easternwell as part of an exclusive process.
"Queensland-based Easternwell is a leading Australian well services and well construction business, focused on the mining, oil & gas and infrastructure sectors. It provides mainly production-focused, high margin services both earlier in the asset lifecycle and throughout the production phase.
"Key services include well servicing and maintenance activities, coal seam gas (“CSG”) drilling, production-related iron ore mine dewatering, backfill drilling, near-shore geotechnical drilling and dam remediation services."
Yesterday’s statement from Transfield said Easternwell operates 65 rigs, with blue chip customers such as BHP Billiton, Cameco, Chevron, Rio Tinto, Santos and Woodside.
"Existing Easternwell senior management are expected to continue in the business and are rolling over a proportion of their equity in Easternwell into Transfield Services shares.
"Easternwell will report as part of the Transfield Services Australian and New Zealand business unit."
Transfield said that for the financial year ending in June 2011, "pro forma sales and EBITDA for Easternwell are expected to be $267 million and $76 million respectively.
"This compares to $68 million in pro forma EBITDA for FY2009 and $50 million in pro forma EBITDA for FY2010.
"EBITDA contribution to Transfield Services for the 6 months ending in June 2011 is expected to be over $40 million."
Transfield said Easternwell had possible new business that could contribute "an additional $30 million in pro forma EBITDA, and which require incremental capital expenditure of $83 million through to 30 June 2012".
