PERTH (miningweekly.com) – ASX-listed diversified mining services provider Perenti has announced plans to acquire all of the issued share capital of fellow-listed driller DDH1, subject to the satisfaction of conditions.

The two companies have entered into a scheme implementation agreement under which DDH1 will receive for each DDH1 share held A$0.1238 cash plus 0.7111 Perenti shares. DDH1 shareholders will also be offered an ability to elect maximum scrip or maximum cash consideration alternatives, subject to scale-back arrangements based on a total available cash pool of A$50-million.

Based on the five-day volume weighted average share price of both Perenti and DDH1, the offer valued  DDH1 shares at A$1.01 a share, representing a 17.4% premium to the company’s last closing price.

“This is a compelling transaction that represents an exciting next step in delivering on Perenti’s purpose, to create enduring value and certainty, by building a portfolio of complementary high-quality businesses,” said MD and CEO Mark Norwell.

“Perenti has a long history in drilling from its Ausdrill heritage and Barminco Diamond Drilling business and understands the attractiveness of the market. The long-term outlook for a sustained production cycle needs increased drilling spend to ensure mining reserves are not diminished, and drilling is becoming more complex, resulting in larger programmes and demand for specialist services.

“DDH1 is a highly respected tier one global operator, with significant capabilities across a complete range of specialised surface and underground drilling services, that are complementary to our existing clients and service offering. We have a clearly articulated framework against which we assess all investment opportunities, with this transaction addressing our key assessment criteria in relation to strategic attractiveness, fit within Perenti and value creation potential.”

Perenti told shareholders on Monday that the transaction offered synergies of up to A$22-million, would enhance the company’s scale to create the ASX’s leading diversified contract mining services company, while improving Australian earnings and free cash flows and broadening strategic service offerings to customers.

Following the transaction, the DDH1 business will form part of a newly created Drilling Services division, which will also comprise Perenti’s existing Ausdrill business.

DDH1’s existing MD and CEO Sy Van Dyk will be appointed as president of the newly created division. Each of the four existing DDH1 brands, DDH1 Drilling, Ranger Drilling, Strike Drilling and Swick, will be maintained and led by their existing leadership teams, with a focus on providing a consistent offering and customer continuity.

The DDH1 board has unanimously recommended that shareholders vote in favour of the proposed transaction, subject to no superior offer emerging. The company also noted that shareholders holding a combined 24.9% of the company had provided the company with voting intention statements in support of the transaction.

Van Dyk said on Monday that the transaction represented a transformative opportunity for all DDH1 stakeholders, enabling them to participate in the additional upside that came from being part of an enlarged and dynamic mining services company.

“The strategic fit between Perenti and DDH1 is exceptional, and our combined expertise will enhance our value offering to clients and employees alike. With a shared commitment to sustainability, innovation, safety and service excellence we are well-positioned to continue growing our businesses. This transaction is a testament to our dedication to driving growth, providing enhanced liquidity, and delivering value for our shareholders,” he added.

The agreement is subject to a number of conditions, including an independent expert concluding it is in the best interest of DDH1 shareholders, as well as shareholder and court approvals.