Boart Longyear, which was listed by Macquarie 16 years ago, to go private following takeover offer

The drilling services company will be taken private under a takeover arrangement at a fraction of the valuation it listed for on the ASX more than 16 years ago.

Boart Longyear, which listed on the ASX in 2007 after the second-largest initial public offer in Australian history at the time, is set to be taken private at a fraction of its former value.

The company, now headquartered in Ontario, Canada, listed in 2007 after raising $2.35bn, after its promoters, a consortium led by Macquarie Bank, sought to raise $2.7bn in what was at the time the second-largest IPO in Australian history, after Telstra’s 2006 $15.5bn T3 offer.

The company had high hopes at the time, with the global economy running hot and resources in high demand.

The chief executive at the time, Paul Brunner, said the company had “a $10bn opportunity in front of us”.

The company was listed in Australia due to its closeness to Asia and robust commodity markets in the region, Mr Brunner said at the time.

The Global Financial Crisis hit soon after the company listed however, and the highly-leveraged firm cut 35 per cent of its global workforce in the first half of 2009, and Boart, which had almost $1bn in debt at the end of 2008, was close to breaching its debt covenants.

The company had recovered somewhat by the end of 2010, with the stock trading at about $4.40 and a 2500-person hiring spree bringing staff numbers back to 9200.

The company has fared poorly over the past decade however, turning in a total shareholder return of negative 43.1 per cent per annum over the past decade and while the current share price – post takeover offer – is $2.75, this follows both a 300 for one and a 20 for one share consolidation, in late 2019 and August 2021 respectively.

An October 2014 recapitalisation transaction with Centerbridge Capital was the start of the company’s journey to being almost entirely owned by private equity, and at this point in time, the company’s major shareholders Centerbridge, Ascribe, First Pacific, Corre and Nut Tree, own 98.86 per cent of the stock on issue.

The company’s Australian-listed stock was up 57.1 per cent in early trade to $2.75, however only 25,853 shares changed hands.

Under the deal, American Industrial Partners Capital Fund VIII will take Boart Longyear private, paying $US371m for the company.

Boart’s board has unanimously recommended that shareholders support the offer, however given that the major shareholders have entered into binding agreements to support the deal, it is a virtual fait accompli.

The company has struggled since listing on the ASX, largely due to a combination of the industry being hobbled by the GFC soon after it listed, and its large debt load.

The Centerbridge recapitalisation deal in 2014 quickly took that firm to a 49.9 per cent stake in Boart, however the drilling services firm continued to struggle under its debt load, which sat at $869m at the end of the first quarter of 2021.

A further substantial recapitalisation announced in May, 2021, involved $US795m of debt being converted to equity, with the company’s private equity shareholders at the time moving to a 98.5 per cent cumulative stake in the business.

Currently there are about 2500 Australian shareholders who own substantially less than 1 per cent of the company.

The company’s new suitor, American Industrial Partners, has more than $16bn in assets under management “focused on industrial businesses across a broad range of end-markets that include aerospace and defence, automotive, building products, capital goods, chemicals, industrial services, industrial technology, logistics, metals and mining, and transportation, among others,” Boart told the ASX.

“Current AIP portfolio companies generate aggregate annual revenues in excess of $28bn and employ over 70,000 employees as of September 30, 2023.’’

The deal is subject to regulatory approvals in both Australia and Canada. It is expected to be finalised in the first quarter of 2024.