PE buyout talks with Australia's Bradken fall through

The consortium had originally offered to pay A$5.10 a share - valuing the company at A$872 million ($731 million) - in early December, having revised the bid down from it initial A$6 a share offer made in August.

According to stock market disclosure, PEP and Bain had successfully concluded confirmatory diligence following Bradken's decision to open its books, but market conditions had made it impossible for the consortium to obtain financing on acceptable terms.

"The volatility in Bradken's end markets has recently increased with further price declines in oil and iron ore," the company said. "While Bradken remains well positioned to navigate through this volatility, there are no visible signs at this stage of a turnaround in the mining cycle."

At the time of going to press, shares in Bradken had fallen by as much as 37% from previous day's close of $4.11.

Set up in 1922, Bradken produces milling and crushing equipment used in mineral processing as well as mining equipment, cast metal services, and products for the transport and general industrial sectors.

The company relies on the resources sector for 92.5% of its revenues, with 26.2% alone tied to iron ore mining and processing activities. Australia and New Zealand account for nearly half of revenue. Bradken has been particularly badly hit by falling demand for crawler systems and other excavation equipment as Australia's miners scale back operations.

In it latest annual report, for 12 months ended June, 2014, the company reported a 68% in net profit to A$21.5 milllion; revenue fell 14% to A$1.13 billion; and EBITDA was down 22% at A$143 million. It will now concentrate on returning to profitable growth through previously announced initiatives including the closure of several foundries in Australia and acquisition of a foundry in India in a bid to cut costs.

Bradken is not the only Australian mining services player to draw interest from private equity during the current commodities downturn. In November, Centerbridge Partners announced it would support a $352 million restructuring plan for Boart Longyear.

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• Topics
• Australasia
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• Bain Capital Asia
• Pacific Equity Partners
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