Mining services specialist Perenti (ASX:PRN) and DDH1 (ASX:DDH) have entered into a binding scheme implementation agreement under which DDH1 will combine with Perenti to create the ASX’s leading contract mining services group.
Under the terms of the proposed transaction, Perenti will acquire 100% of the issued capital of DDH1, with DDH1 shareholders to receive $0.1238 cash plus 0.7111 Perenti shares for each DDH1 share held, adjusted for any dividends paid by both parties between the announcement and implementation of the scheme.
The company says the implied offer value of $1.01 per DDH1 share represents a 17.4% premium to DDH shares based on Perenti’s 5-day volume weighted average price (VWAP) to 23 June 2023 of $1.252, ascribing DDH1’s business an equity value of $410 million.
DDH1 shareholders will also have the ability to elect to receive maximum scrip or maximum cash consideration alternatives to the standard consideration, subject to scale-back based on a total cash pool of $50 million.
Additionally, the implementation of the scheme is subject to certain terms and conditions set out in the implementation agreement, including an independent expert concluding that the scheme is in the best interests of DDH1 shareholders, approval by the requisite majorities of DDH1 shareholders and the court, no regulatory restraints to the implementation of the scheme, no material adverse change to prescribed occurrences in relation to Perenti or DDH1, and no material breach of warranties.
Commenting on the proposed transaction, DDH1 Chief Executive Officer (CEO) and Managing Director Sy Van Dyk says: “Today, we are excited to announce the proposed transaction between DDH1 and Perenti, paving the way for the creation of the ASX’s leading contract mining services group.
“This represents a transformative opportunity for all DDH1 stakeholders…”
This represents a transformative opportunity for all DDH1 stakeholders, enabling them to participate in the additional upside that comes 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.”
Also addressing the proposed transaction, Perenti CEO and Managing Director Mark Norwell says this deal with DDH1 provides a long-term outlook for a sustained production cycle, and that the company is looking forward to delivering market-leading solutions for its customers alongside DDH1.
“Perenti has a long and proud history in drilling and understands the structural attractiveness of the market from our Ausdrill heritage and Barminco Diamond Drilling business. 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 programs and demand for specialist services.
“The long-term outlook for a sustained production cycle needs increased drilling spend to ensure mining reserves are not diminished…”
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 look forward to the DDH1 team joining our group and continuing to deliver market-leading solutions for our customers.”
The company notes DDH1 shareholders can expect to own about 29% of the combined business and that the combined business would have a pro forma market capitalisation of $1.3 billion, positioning Perenti for ASX 200 inclusion.
Under the terms of the deal, Rob Cole will remain Chair of Perenti, and Mark Norwell and Peter Bryant will remain Managing Director and CEO and CFO of Perenti respectively.
With both parties now entered into the implementation agreement, DDH1 shareholders are set to meet in September 2023 to vote on the scheme.
Perenti is an ASX-listed global diversified mining services group founded in Kalgoorlie, Western Australia, in the 1980s that has grown into one of the largest mining services companies in the world, offering both surface and underground mining solutions at scale. The company also has experience operating some of the biggest projects in the world while working with its clients.
DDH1 represents a premier mineral drilling contractor specialising in deep-hole directional drilling services across Australia with offices in Perth and Brisbane.
Images: Perenti Ltd