Resource Capital Funds to buy Australia's Ausenco
Resource Capital Funds has agreed to buy Ausenco, an Australia-listed mining services business struggling as a result of the commodities downturn, at an enterprise value of A$153.7 million ($113.3 million).
Resource Capital Fund VI will buy 199.5 million shares in Ausenco for A$0.40 apiece, which represents an 18% premium to the June 13 closing price. The PE firm will also assume responsibility for the company's A$73.9 million in net debt. Resource Capital became Ausenco's sole and primary secured lender in April, taking over positions held by ANZ and National Australia Bank. It plans to convert a A$61 million debt facility into 97 million shares in Ausenco and may convert its working capital facility as well.
The deal requires shareholder approval, but First Samuel, which owns 18.1% of Ausenco, has already indicated that it will vote in favor. Ausenco shares opened up 11.7% at A$0.38 on June 14 in response to the news, before closing at A$0.39. This still represents a significant deficit on the price of A$16.20 achieved in May 2008 and A$3.86 from March 2013.
"The proposal is at a significant premium to market value and on terms which, given the circumstances that we face with the near-term maturity of our secured debt, we believe reflect fair value. Ausenco operates in a dynamic and challenging market which would present ongoing uncertainties and risks to the company if it were to continue independent operation," George Lloyd, chairman of Ausenco, said in a statement.
Founded in Brisbane in 1991, Ausenco provides engineering, construction and project management services to clients in the minerals and metals, infrastructure, and energy sectors. Revenue came to A$245.8 million in 2015, down from A$357.1 million the previous year, while the net loss widened to A$86.1 million from A$25 million, largely due to A$61 million in impairment charges. The company's debt load also increased from A$18.6 million to A$60.9 million.
Several Australian mining services providers have attracted PE interest as they seek to restructure operations and reduce debt. In 2014, Centerbridge Partners supported a restructuring plan for Boart Longyear, while The Blackstone Group agreed to buy the chemicals division of Orica. Bradken has also been targeted, but a deal has yet to be forthcoming, with a recapitalization proposal from CHAMP Private Equity rejected in April.
Resource Capital Funds invests in hard mineral commodities assets globally, and has supported 150 mining companies with projects located in 47 countries across 29 commodities. The firm is currently investing its sixth fund, which has committed capital of A$2.04 billion.
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