CHAMP PE to invest in Australian mining supplier Bradken

Bradken, one of several Australian mining services players hit by the commodities downturn, has been the subject of several private equity buyout offers in the last 12 months. Pacific Equity Partners (PEP) and Bain Capital had one offer rebuffed and a follow-up was abandoned due to difficulties obtaining funding. PEP returned in April with Koch Industries only to see a new bid rejected.

The CHAMP and Sigdo Koppers investment will be structured as a subscription to redeemable convertible preference securities issued by a Bradken subsidiary. The proceeds will be used to pay down debt and increase operating flexibility.

"We welcome the investment by the consortium and look forward to its support as Bradken continues to evolve and position itself with the current market outlook," Peter Richards, chairman of the independent board committee tasked with negotiating with the investors, said in a statement.

Bradken has also agreed with creditors to amend covenants on its outstanding debt. The maximum net debt-to-EBTIDA ratio - above which creditors could foreclose on the debt - will rise to 3.5x this year before incrementally reverting back to 3x by 2016. The company estimates that, following the new investment, the current ratio would adjust to approximately 2.6x.

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.

For the 12 months ended June 2014, Bradken 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. Performance in the first half of the current financial year was equally disappointing. The company has responded by restructuring divisions, closing operations, and generally cutting costs. It projects EBITDA of A$136-138 million for 2015.

Bradken's stock is currently trading at approximately A$1.50. When PEP and Bain tabled their first buyout offer in August 2014, they were willing to pay A$6.00 per share. The most recent offer from PEP and Koch was for A$2.50 per share.

Sigdo Koppers, which generated sales of $2.63 billion last year, has operations in five continents across the industrials, construction and commercial and automotive sectors. Magotteaux is a global mining services provider with annual revenue of approximately A$1 billion.

CHAMP closed its third buyout fund at nearly $1.5 billion in 2010 and is understood to be seeking a similar amount for its fourth vehicle.

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• Topics
• Australasia
• Industrials
• PIPEs
• Australia
• CHAMP Private Equity
• PIPE
• Commodities
• manufacturing