Major Drilling announces the acquisition of Bradley Group, a $70 million public equity offering and new enhanced credit facilities
MONCTON, NB, Sept. 8, 2011 /CNW/ --
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MONCTON, NB, Sept. 8, 2011 /CNW/ - Major Drilling Group International
Inc. ('Major Drilling' or the 'Corporation') (TSX: MDI) is pleased to announce that it has entered into an
agreement to acquire all of the issued and outstanding shares of
Bradley Group Limited ('Bradley Group') (the 'Acquisition'), a family-owned drilling company based in Rouyn Noranda, Quebec
(Canada), for an aggregate purchase price of $80 million (the 'Purchase Price'), subject to adjustments and subject to certain customary closing
conditions. $72 million of the Purchase Price will be payable in cash
at the closing of the Acquisition with the balance of $8 million being
subject to a hold-back over 3 years. In addition, at the closing of the
Acquisition, the Corporation expects to repay a portion of the
indebtedness of Bradley Group under its credit facilities in the amount
of approximately $10 million, and the remaining portion of such
indebtedness in the amount of approximately $5 million will effectively be assumed by the Corporation. The Acquisition and
other related transaction costs are being financed through a $70
million 'bought deal' public offering of subscription receipts and new
and extended credit facilities of $100 million in aggregate.
'The acquisition of Bradley Group is a unique opportunity to further
Major Drilling's corporate strategy of focusing on specialized
drilling, expanding our geographic footprint in areas of high growth
and of maintaining a balance in our mix of drilling services. The
operations of both companies are very complimentary in terms of
geography, personnel and strategies' said Francis McGuire, President & CEO of Major Drilling.
Transaction Highlights
-- Furthers Major Drilling's corporate strategy of focusing on
specialized drilling.
-- Adds 124 rigs and 841 employees to Major Drilling's base of 571
rigs and 4,362 employees.
-- Adds new geographic footprints in Northern Québec and Northern
Ontario where Major Drilling is less active and in the
Philippines where Major Drilling does not have a presence.
-- Increases Major Drilling's presence in Colombia, Mexico and
Suriname which are expected to be areas of high growth in the
mining industry.
-- With 70% of Bradley's revenue currently being generated on gold
properties, the Acquisition is expected to increase Major
Drilling's presence in the gold industry.
-- In excess of 70% of Bradley Group's revenue comes from Eastern
Canada, a region relatively less affected by the last cyclical
downturn in the drilling industry.
-- The new and extended credit facilities are expected to provide
Major Drilling with the flexibility needed to take advantage of
other growth opportunities as they may arise.
For the 12 months ended June 30, 2011, Bradley Group had revenue of
approximately $102 million and EBITDA of approximately $17 million.
Assuming that Bradley Group's customers go forward with their stated
plans and that current market conditions in the mining industry
prevail, management expects to see continued growth.
Like Major Drilling, Bradley Group was beginning to gear up in response
to the upturn in mining exploration and incurred heavy start-up costs
during the 12-month period ending on June 30, 2011. Whereas Major
Drilling had renewed approximately 50% of its contracts by the middle
of the current calendar year, at higher prevailing prices, most of
Bradley Group's contracts were concluded at prices prevailing before
the most recent upturn in the drilling industry, but most of them will
expire and come up for renewal around the end of the calendar year.
Francis McGuire, President and CEO of Major Drilling, stated 'We are very excited to welcome Bradley Group into the Major Drilling
group, and are pleased to expand our presence in Eastern Canada, an
area that has historically performed well, even during the last
cyclical downturn.'
About Bradley Group
Headquartered in Rouyn Noranda, Québec (Canada), Bradley Group has a
fleet of 124 rigs that are highly compatible with Major Drilling's rig
fleet. Approximately 80% of Bradley Group's drilling rigs are surface
drilling rigs and approximately 20% are underground diamond drilling
rigs. The Corporation expects to be in a position to focus on
maximising the use of the combined Major Drilling and Bradley Group
fleets without the need in the short-term to add to the Bradley Group
fleet. Management believes Bradley Group has a higher proportion of
specialized surface rigs than the industry norm. In addition, Bradley
Group operates in Northern Québec and in Northern Ontario where Major
Drilling is less active and in the Philippines where Major Drilling
does not have a presence. Bradley Group has a fleet of 25 underground
rigs in Canada, which adds stability and diversification to Major
Drilling's fleet. In excess of 70% of Bradley Group's revenue comes
from Eastern Canada, a region relatively less affected by the last
cyclical downturn in the drilling industry. The remainder of the
operations are in Colombia, Mexico, Suriname and Philippines, all areas
of expected growth within the mining industry.
Bradley Group has a highly experienced workforce of 841 employees and an
experienced management team, both of which Major Drilling plans to
integrate into its operations. The combination of the two teams is
expected to yield operational efficiencies, which are expected to bring
an array of opportunities.
'The cultures of our two companies are very similar and we look forward
to a very smooth integration of our operations. By combining our
operations in Canada, Colombia, Mexico, and Suriname and by adding the
Philippines to our geographic footprint, we are building a solid base
to take our operations forward.' said Mr. McGuire.
Financing the Acquisition
$70 Million Public Equity Offering
To finance the payment of a portion of the Purchase Price and related
expenses, Major Drilling has entered into an agreement with a syndicate
of underwriters led by TD Securities Inc. (collectively the 'Underwriters') to sell, on a bought deal basis, subscription receipts for common
shares of Major Drilling. The agreement with the Underwriters includes
the issuance of 5,900,000 subscription receipts at a price of $11.90
per subscription receipt to raise gross proceeds of $70 million (the 'Offering'). In addition, the Underwriters have been granted an over-allotment
option, exercisable at the Offering price for a period of 30 days from
the closing date of the Offering, for additional gross proceeds of up
to $10.5 million. The subscription receipts will be offered in all
provinces of Canada, except Québec, pursuant to a short form
prospectus.
The proceeds from the Offering will be held in escrow pending the
completion of the Acquisition. If the Acquisition is completed on or
before December 15, 2011, the net proceeds will be released and the
subscription receipts will be exchanged on a one-for-one basis for
common shares of Major Drilling upon closing of the Acquisition for no
additional consideration and without further action. If the Acquisition
is not completed on or before December 15, 2011, if the Acquisition
agreement is terminated at an earlier time, or if Major Drilling
advises the Underwriters or announces to the public that it is not
proceeding with the Acquisition, the holders of subscription receipts
will receive a cash payment equal to the offering price of the
subscription receipts and any interest that was earned thereon during
the term of the escrow.
The issuance of the subscription receipts and underlying common shares
pursuant to the Offering are subject to customary approvals of
applicable securities regulatory authorities, including the Toronto
Stock Exchange. Closing of the Offering is expected to occur on or
about September 28, 2011.
Credit Facilities
In conjunction with the Acquisition, the Corporation has accepted a
commitment letter from its existing lenders, The Bank of Nova Scotia
and The Toronto-Dominion Bank (the 'Lenders') whereby the Lenders have agreed to provide an aggregate of
$100,000,000 in credit facilities in favour of Major Drilling for a
five-year term, consisting of (i) a new $25,000,000 non-revolving term
acquisition facility (the 'New Credit Facility'), (ii) an extension of an existing $25,000,000 revolving operating
facility (the 'Operating Facility') and (iii) an extension and increase to $50,000,000 of an existing
$45,000,000 revolving term facility (the 'RT Facility') used to finance equipment purchases (collectively with the New Credit
Facility and the Operating Facility, the 'Credit Facilities'). The proceeds of the New Credit Facility are to be used to refinance
existing debt of the Corporation. The proceeds of the RT Facility are
to be used to finance a portion of the Purchase Price, to refinance a
portion of existing indebtedness of Bradley Group, to pay certain
transaction costs and to finance future equipment purchases. The
Operating Facility will continue to be used for general corporate
purposes of the Corporation. The Credit Facilities will give Major
Drilling the required flexibility to take advantage of growth
opportunities as they may arise. The commitment of the Lenders to
provide the Credit Facilities is subject to customary conditions for
facilities of this nature and magnitude in similar circumstances.
In addition, the Corporation will arrange for certain facilities to be
maintained that are currently available to Bradley Group or its
subsidiaries of which approximately $5 million is currently
outstanding.
Closing Date and Conditions to Closing
The Acquisition and the Credit Facilities are expected to close as soon
as practicable following the closing of the Offering, but no later than
November 30, 2011. The Acquisition has been approved by the Board of
Directors of Major Drilling and is subject to customary closing
conditions.
Advisors
Legal advice is being provided to Major Drilling by McCarthy Tétrault
LLP. TD Securities Inc. is leading the Offering on behalf of the
Underwriters and legal advice to the Underwriters is being provided by
Stikeman Elliott LLP.
_____________________________________________________________________
|Conference Call Information |
| |
|Major Drilling will host a conference call to discuss the Offering on|
|September 8, 2011 at 5:00 p.m. (Eastern Daylight Time). The call will|
|be accessible by telephone at (888) 231-8191 (Toll-Free Dial-In |
|Number) or (647) 427-7450 (International Dial-In Number) and enter |
|the pass code: 98918354. An audio replay of the conference call will |
|be available until September 15, 2011 at 11:59 (Eastern Daylight |
|Time). To access it, dial (855) 859-2056 (Toll Free Dial-in Number) |
|or (403) 451-9481, (778) 371-8506, (416) 849-0833, (613) 667-0035, |
|(514) 807-9274 or (902) 455-3955 (Local Dial-in Numbers) and enter |
|the pass code: 98918354. |
| |
|Major Drilling will provide a simultaneous webcast of the conference |
|call. To access the webcast please go to the investors/webcast |
|section of Major Drilling's website at |
|www.majordrilling.com and |
|click the attached link, or go directly to the CNW Group website at |
|www.newswire.ca for |
|directions. Participants will require Windows MediaPlayer, which can|
|be downloaded prior to accessing the call. Please note that this is |
|listen only mode. |
|_____________________________________________________________________|
Availability of Documents
Copies of related documents, such as the prospectus and share purchase
agreement related to the Acquisition, will be available on SEDAR (www.sedar.com) as part of the public filings of Major Drilling.
About Major Drilling
Based in Moncton, New Brunswick, Major Drilling Group International Inc.
is one of the world's largest metals and minerals contract drilling
service companies. To support its customers' mining operations, mineral
exploration and environmental activities, Major Drilling maintains
operations in Canada, the United States, South and Central America,
Australia, Asia, and Africa.
This press release contains forward-looking information within the
meaning of applicable securities laws. All information and statements
other than statements of historical facts contained in this press
release are forward-looking information. These statements are
'forward-looking' because they are based on current expectations,
estimates, assumptions, risks and uncertainties. These forward-looking
statements are typically identified by future or conditional verbs such
as 'outlook,' 'believe,' 'anticipate,' 'estimate,' 'project,' 'expect,'
'intend,' 'plan,' and terms and expressions of similar import. Such
forward-looking information includes, without limitation, statements
with respect to: the anticipated closing of the Offering, the
Acquisition and the Credit Facilities, the anticipated use of proceeds
of the Offering and of the Credit Facilities and the benefits that may
accrue to the Corporation and its shareholders as a consequence of the
Acquisition, the future financial position, drilling operations, growth
prospects and opportunities, the ability to renew drilling contracts
upon their expiry, expected growth in the mining industry, operational
efficiencies and added stability of cash flows, business strategy and
plans, and objectives of or involving the Corporation, cash flows and
earnings and the components thereof. Actual events or results may
differ materially.
The forward-looking information is based on certain key expectations and
assumptions made by the Corporation, including expectations and
assumptions concerning availability of capital resources, performance
of operating facilities, strength of market conditions, customer
demand, satisfaction of all conditions of closing of the Acquisition,
absence of exercise of any termination right and the timing and receipt
of regulatory approval with respect to the Offering. Although the
Corporation believes that the expectations and assumptions on which
such forward-looking information is based are reasonable, undue
reliance should not be placed on the forward-looking information since
no assurance can be given that they will prove to be correct.
Since forward-looking information addresses future events and
conditions, by its very nature it involves inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, cyclical downturn, competitive
pressures, exposure to general market conditions, dealing with business
and political systems in a variety of jurisdictions, repatriation of
property in other jurisdictions, payment of taxes in various
jurisdictions, exposure to currency movements, inadequate or failed
internal processes, people or systems or from external events,
dependence on key customers, safety performance, legal and regulatory
risk, extreme weather conditions and the impact of natural or other
disasters, specialized skills and cost of labour increases, the ability
to retain qualified personnel, the performance of third-party
suppliers, equipment and parts availability, reputational risk, the
absence of market for the Subscription Receipts, escrow release
conditions, volatility of market price of shares, dilutive effects of
the Offering on holders of common shares, failure to close the
Acquisition and the Credit Facilities, integration of the Bradley Group
business, failure to realize the Acquisition benefits, potential
undisclosed liabilities associated with the Acquisition, and expansion
and acquisition strategy. Readers are cautioned that the foregoing list
is not exhaustive.
To the extent any forward-looking information in this press release
constitutes future-oriented financial information or financial
outlooks, within the meaning of securities laws, such information is
being provided to demonstrate the potential benefits of the Offering,
the Acquisition and the Credit Facilities and readers are cautioned
that this information may not be appropriate for any other purpose.
Future-oriented financial information and financial outlooks, as with
forward-looking information generally, are, without limitation, based
on the assumptions and subject to the risks set out above.
The reader is further cautioned that the preparation of financial
statements in accordance with Canadian GAAP or IFRS requires management
to make certain judgments and estimates that affect the reported
amounts of assets, liabilities, revenues and expenses.
The forward-looking information contained herein is expressly qualified
in its entirety by this cautionary statement. The forward-looking
information contained herein is made as of the date of this press
release, and the Corporation undertakes no obligation to publicly
update such forward-looking information to reflect new information,
subsequent or otherwise, unless required by applicable securities laws.
References in this press release to 'EBITDA' of the Bradley Group are to
earnings before interest, income taxes, depreciation and amortization.
EBITDA is a widely accepted financial indicator which provides
investors with an indication of cash available for distribution prior
to debt service, capital expenditures and income taxes. Investors
should be cautioned, however, that EBITDA should not be construed as an
alternative to net earnings determined in accordance with Canadian GAAP
or IFRS as an indicator of the performance or to cash flows from
operating, investing and financing activities as a measure of liquidity
and cash flows. EBITDA is not a recognized measure under Canadian GAAP
or IFRS and does not have a standardized meaning prescribed by Canadian
GAAP or IFRS, and the method used to calculate EBITDA may differ from
the method used by other issuers. Accordingly, EBITDA may not be
comparable to similar measures used by other issuers.
All dollar values are quoted in Canadian dollars unless otherwise
indicated.
THIS NEWS RELEASE IS NOT AN OFFER OF SECURITIES FOR SALE IN THE UNITED
STATES AND IS NOT AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OF MAJOR DRILLING, NOR SHALL IT FORM THE BASIS OF, OR BE
RELIED UPON IN CONNECTION WITH ANY CONTRACT FOR PURCHASE OR
SUBSCRIPTION. THE SUBSCRIPTION RECEIPTS WILL ONLY BE OFFERED IN CERTAIN
PROVINCES OF CANADA BY MEANS OF THE PROSPECTUS REFERRED TO ABOVE.
SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION UNDER THE U.S. SECURITIES ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THESE SECURITIES HAVE NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE U.S. SECURITIES ACT OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION THEREFROM.
To view this news release in HTML formatting, please use the following URL: http://www.cnw.ca/en/releases/archive/September2011/08/c9623.html
Denis Larocque, Chief Financial Officer
Tel: (506) 857-8636
Fax: (506) 857-9211
ir@majordrilling.com