Bradken board backs Hitachi Construction’s $976 million bid

Mining consumables group Bradken has received a takeover offer from Hitachi Construction valuing the firm at $976m.

Bradken share performance

Bradken’s long line-up of failed suitors will have one last chance to revisit their offers after the mining consumables group drew a $976.1 million takeover bid by Japan’s Hitachi Construction ­Machinery.

Bradken’s board late yesterday recommended shareholders accept Hitachi’s $3.25 per share cash offer, which would crystallise the firm’s strong share price recovery this year. The offer, if successful, would finally cap a tumultuous two years of M & A machinations at Bradken that drew offers from a host of groups.

Private equity plays Pacific Equity Partners, Bain Capital Asia, Koch Industries and CHAMP Private Equity, along with Chilean industrial conglomerate Sigdo Koppers, have all considered or ­tabled offers for Bradken in various combinations since 2014.

It is understood that PEP has no interest in making another offer for the group, while CHAMP is considered more likely to cash out its interest in Bradken at a handsome profit rather than enter a bidding war for the company.

The Hitachi offer values Bradken at $688.5m, or $976.1m including debt. While the $3.25 offer is well below the initial $6 per share offer Bradken drew from PEP and Bain back in late 2014, it is dramatically higher than the 38c per share low it plumbed back in January when the downturn in the resources ­sector was working against it and investor and corporate interest in the group fell off.

The offer represents a 34 per cent premium to the stock’s last traded price and a 40 per cent premium to its volume-weighted average price over the past 30 days.

The offer is conditional on Hitachi securing a minimum of 50 per cent acceptances, which will prevent any of Bradken’s big individual holders from blocking the deal.

CHAMP, which invested in $56m of redeemable convertible preference securities in Bradken last year, will have the right to convert that into Bradken stock at $2 per share. Converting the shares and selling them into the Hitachi offer would give it a $32m-plus profit on the investment.

The offer from Hitachi follows a strong turnaround in the business under chairman Phil Arnall and chief executive Paul Zuckerman, who took on the roles in December and March, respectively.

The pair replaced long-term executive team headed by chairman and former NSW premier Nick Greiner and chief executive Brian Hodges.

Bradken said it believed the group’s head office would remain in Newcastle with the company to live on as a “key part” of Hitachi’s global mining and industrial services business. “Bradken’s staff have worked very hard to reposition the business for success following the downturn in mining, and can be proud that their achievements have been recognised by (Hitachi),” Mr Zuckerman said.

Hitachi president and chief executive Yuichi Tsujimoto said: “We have great respect for the Bradken team and believe its businesses are complementary with our mining equipment services business.

“Both companies leveraging each other’s global network will enable us to strengthen our combined businesses and enhance our earnings.”

Hitachi is a major player in the international mining equipment business. The group has a market cap of $5.5 billion and annual sales of some $10bn.

The offer continues a long run of corporate activity in the mining services sector, with several distressed companies falling into opportunistic offers while other parties take advantage of the weak conditions to buy leading groups at discounted prices.

Mining services groups including Emeco, Ausenco, Cardno and Sedgman have passed into new hands over the past year. Bradken recorded a loss of $195.9m last financial year, driven primarily by a $163.2m impairment of plant and equipment. Excluding that and other one-offs, it generated an underlying net profit of $29.5m.