Lucas Drilling tests the market after suitor’s bid stalled
Flyer documents have hit the market for the drilling arm of AJ Lucas Group after Mitchell Services made an opportunistic bid for the operation.
The boutique advisory firm Highbury Partnership is working on the sale, which has been launched to determine if a higher offer can be achieved.
Lucas Drilling is being pitched as a leading provider of drilling services to Australia’s coal sector, offering a suite of services across five competencies.
The Brisbane-based division includes 39 multipurpose drill rigs designed specifically to service the coal market, supported by about 350 technical and administrative staff.
It has operations in the Bowen and Gunnedah basins on Australia’s east coast as well as the southern coalfield in NSW.
The division is largely exposed to metallurgical coal, which has recently experienced a strong rally in its price, and counts Rio Tinto, Anglo American, Glencore, South32 and Whitehaven Coal among its key customers.
Major increases in Indian steel production forecasts are likely to drive increased global demand over the next 15 years.
Indicative bids are due before Christmas and the sale comes as the resources sector starts to ramp up with more activity.
About a decade ago, AJ Lucas, which has a market value of just over $200m, purchased Mitchell Drilling from Mitchell Services, which comprised the local drilling operations. Mitchell still owns international drilling operations.
Mitchell Services made a bid for Lucas Drilling on August 6 and was submitted on the basis that AJ Lucas would agree to engage on an exclusive basis for an initial period. However. there was no exclusivity granted and no further progress was made.
A number of groups are weighing sales of mining services and engineering operations.
Downer is said to be working with Deutsche Bank on options for its mining division as parties source capital for a management buyout option for the business.
The listed Downer told the market yesterday that it had not received any management buyout proposal, although parties have been in the market seeking equity and debt for a potential deal worth between $500m and $550m.
Apparently, Cimic was also recently contemplating a sale of its Thiess contract mining division before opting to retain the business, and while there has been talk of Lendlease divesting its engineering operations following major writedowns on its NorthConnex project, sources say that achieving a sale for the division will be a near impossible task and it will likely be wound down instead.
Meanwhile, MPC Kinetic, advised by UBS and Credit Suisse, appears to be braving the public markets, with sources reporting it continues to press on with its initial public offering.
It is understood the company, which provides essential upstream services to the energy and resource industries, has started analyst briefings, defying the tough market conditions.
The company has been described as a business with $55m in annual earnings and $500m of revenue and analysts say that its enterprise value is between $388m and $462m.
The business is owned by Viburnum Funds out of Perth and SCF Partne
NRW’S PURCHASE OF HUGHES EAST COAST DRILLING :
https://nrw.com.au/nrw-holdings-acquires-hughes-drilling/
We paid $11 million for about the same number of drills and less than half the staff on December 9, 2016.
“Hughes’ East Coast operations comprise a fleet of 35 large drill rigs, and approximately 160 employees, providing services to a number of major mine operators and owners in Queensland and New South Wales.
With a forward order book of $50 million and annual revenues of around $40 million, the acquisition of Hughes’ East Coast operations aligns with NRW’s strategy to build upon their existing presence in Queensland and expand into New South Wales.”
NWH Price at posting:
$1.82 Sentiment: Buy Disclosure: Held
(20min delay)
