Hitachi Construction to buy Bradken for $689 million

Oct 04, 2016

A member of Japan’s sprawling group of Hitachi companies has launched an agreed bid for heavy engineer Bradken, as signs of a turnaround in its operations emerge.

Hitachi Construction Machinery is to pay $689 million for the troubled heavy engineer while committing to retain its head office in NSW at Newcastle.

The bidder is offering $3.25 cash a share, which is a significant premium to its close Monday of $2.43, up 1c on the day.

The offer is also significantly above the engineer’s share price low earlier this year of 38c, but equally well shy of the high of $8.59 which was touched in late 2012, when the mining investment boom was in full swing.

It is also the second bid by a Japanese company’s for a locally listed entity in a matter of days, since it follows the $349 million purchase by an arm of Nomura Securities, Nomura Research Institute, of local software house ASG

Bradken’s board support for the Hitachi bid is subject to no higher offer surfacing, as well as being subject to an independent expert’s report the offer is both fair and reasonable for Bradken shareholders.

With 3500 employees worldwide, the bid by Hitachi ramps up its exposure to the service and maintenance sector, where Bradken has ongoing contractual commitments.

In the year to June, Bradken posted earnings before interest,  tax, depreciation and amortisation (EBITDA) of just $50 million, foreshadowing no improvement in the year ahead, due to the subdued level of mine sector capital spending.

Earnings in the second half of the year were stronger than the first half, but any full revival is some way off.

As part of its renewed focus, Bradken has highlighted both the mining consummables market, the so-called ’wear parts’ sector - both mobile and fixed equipment - along with the specialty forging market of north America as areas of focus. It had also flagged ongoing unspecified asset sales as it seeks to strengthen its balance sheet and prepares for the lengthy downturn.

Due to the steep fall in mining sector capital spending, and the long time it is expected to take management to steer the group into earnings growth, several analysts ceased covering Bradken shares earlier in the year.

Japan’s Hitachi Construction Machinery Co has made a bid to buy Australia’s Bradken Ltd for about $689 million.

In a statement late on Monday Bradken said Hitachi has made a cash offer for the mining services company at a value of $3.25 per share.

The board of Bradken unanimously recommended the deal to its shareholders the company statement said.

Bradken chairman Phil Arnall said: "I am pleased to announce this Offer by HCM, which provides shareholders with an attractive premium. On successful completion, it lets Bradken, which has a proud history in mining and industrial services, join with one of the world’s largest machinery companies to form a premium global business."

 

Source: The Sydney Morning Herald