In a joint statement, the mining service companies announced an all-scrip merger deal with Brandrill shareholders to receive one Ausdrill share for every 14.5 Brandrill shares held.
The deal values Brandrill at 9.5c per share or $45.2 million based on its current shares on issue.
The value per share represents a 77% premium to Brandrill’s volume-weighted average price of 5.4c per share for the 30 days prior to the announcement date and a 44% premium to Brandrill’s 6.6c closing price on Friday.
The merger is subject to a number of conditions including approval from Brandrill shareholders, who will in late November vote on the merger during a shareholder meeting.
If approved, the merger is likely to be implemented in December 2009.
Brandrill managing director Ken Perry today told journalists during a media teleconference that Brandrill’s board, after considering the merits of the bid, would accept the proposal in the absence of a superior offer.
“The Brandrill board believes the merger provides a lot of compelling advantages for both sets of shareholders,” he said.
“Our Brandrill shareholders will enjoy being part of a larger, more diverse combined group which has a great array of prospects and growth.
“Brandrill will also benefit from a number of activities that Ausdrill does that Brandrill doesn’t do, including the large African businesses and the drilling consumables business that Ausdrill have.
“Likewise Ausdrill shareholders will hopefully benefit from the special skills and expertise that Brandrill brings to the merger.”
Ausdrill managing director Ron Sayers told journalists the proposed merger would create opportunities for operational synergies.
“We have a manufacturing plant that manufactures all our drilling consumables and Brandrill themselves have consumption of probably $15-20 million a year in that area and we see that as a real fit with our manufacturing facilities,” he said.
He said the tie-up with Brandrill would also provide Ausdrill with an entry into the coal industry.
“We are committed to the coal seam methane gas business,” he said. “We entered into a joint venture with a partner on the east coast.
“We see that as adding value to what Brandrill are already doing in that area and their intent of getting into the methane gas business as well.”
Looking ahead, both companies believe the outlook for the mining services sector remains strong despite the global economic slump.
If the merger takes place, Brandrill management and workforce will be integrated into the existing Ausdrill structure with Brandrill director Mason Hills to join the Ausdrill board.
Ausdrill is no stranger to merger and acquisition activity.
Last year, mining services company Macmahon offered 1.65 of its shares for every Ausdrill stock – not once but twice – but Ausdrill claimed the bid would put Ausdrill shareholders at risk.
The offer lapsed when Macmahon failed to raise even 1% acceptances from Ausdrill shareholders.