DDH1 revives IPO plan

Mining services provider DDH1 Drilling, backed by private equity firm Oaktree Capital Management, is believed to be reviving its plans for an initial public offering.

It comes after the company made efforts to list last year through UBS and Macquarie Capital, along with Bank of America, and the expectations are that the same advisers will be on the transaction this time around.

DDH1 is Australia’s largest diamond core drilling contractor, serving the Australian hard rock (non-bulks) minerals industry and is a strong performer in the area in which it operates.

At a Macquarie Group event last year, DDH1 was promoted as a business with the newest and most standardised drilling fleet in Australia.

Its diversified customer portfolio includes a number of well-capitalised repeat clients.

The business is owned by founders Murray Pollock and Matt Thurston, along with Oaktree.

The company last year tried to list with a market value of around $500m and the latest initial public offering efforts will be a major test of investor appetite for the mining services industry.

Last year, fund managers were told that the business was generating $220m of revenue annually and $30m of earnings before interest and tax.

Weighing in the favour of the sector is that it has been relatively unaffected by the COVID-19 restrictions and groups with exposure to the gold sector are in hot demand as the price of the commodity soars.

But no mining services floats have occurred in Australia for some time and, while the industry has been improving on the back of some stronger commodity prices, it will be interesting to see if that is enough to encourage fund managers to overlook the industry’s slim margins.

Should the DDH1 listing be successful, other groups could follow DDH1 to the boards.

Bis Industries tried to float in 2013 as a company worth $1.65 billion, equating to between 10.9-13 times its earnings, but the plans were shelved due to a lack of investor demand.

The company, then owned by Kohlberg Kravis Roberts, later was subject to a major recapitalisation.

It sought to address its $600m-plus debt with private equity firm The Carlyle Group coming to the rescue, acquiring loans in the business along with Varde Partners, Davidson Kepner Capital Management and Metrics Credit Partners.