News: Resource Development Group to acquire industrial contractor

Resource Development Group (ASX:RDG) is likely to trade significantly higher after entering into a conditional share sale agreement to acquire Perth-based Central Systems.

Central Systems is a multi-disciplined construction contractor and provider of maintenance services to the mining, energy and infrastructure sectors in Australia.

The company has a blue chip client base including Samsung, Fortescue Metals Group (ASX:FMG), BHP Billiton (ASX:BHP), Rio Tinto (ASX:RIO), Xstrata and Newcrest (ASX:NCM).

Major contracts currently being delivered by Central Systems include a circa $100 million contract with Samsung for the Roy Hill Bridges Project, underground concrete contracts for Newcrest’s Cadia minesite, and multiple brownfields projects under a multi-year panel contract with BHP.

Central Systems business generated unaudited revenue of $195 million in the financial year ending 30 June 2014 making an unaudited $22.2 million Net Profit Before Tax, and its order book for FY15 stands at $136 million.

RDG will issue Central Systems shareholders a total of 497,175,172 shares as consideration.

The transaction is subject to various conditions including ASX listing rules, shareholder approval, and consents from Central's financiers.

This is a major acquisition given the volume business and RDG's market cap of just $6 million.