Contract miners join forces
By Mark Drummond
Mining contractors Eltin Ltd and Henry Walker Ltd have
agreed to a $300 million merger, almost four years after
Eltin's $105 million deal to absorb fellow competitor
Roche Brothers collapsed.
The deal, under which Henry Walker will offer six shares
and 84¢ for every seven Eltin shares through a Part A
offer, continues a rationalisation of the contract mining
industry.
It follows last week's purchase by Downer Group Ltd of
CSR Ltd's contract mining and civil contracting
businesses, AWP Contractors and CSR Contracting.
The merged group will be known as Henry Walker Eltin
and will have a combined sharemarket capitalisation of
about $300 million.
Henry Walker managing director Mr Richard Ryan said
there was compelling logic behind the merger, which
would increase management and technical depth while
generating savings in efficiencies and overheads.
It would enhance growth opportunities and give the
combined group a more diversified earnings base, he
said.
Mr Ryan said the merger would lead to an increase in
earnings per share this financial year.
He suggested the merged group would also be more
endearing to the investment community and create extra
trading liquidity.
The merger received a warm reception from the
sharemarket, with Henry Walker shares up 13¢ to $1.80
and Eltin rising 13.5¢ to $1.625. Eltin shares are valued
at $1.662 under the offer terms.
Henry Walker Eltin will have a $1.86 billion order book
and annual revenues of $1.3 billion from contracts in
Australia, New Zealand, Africa, Indonesia and South
America.
Mr Ryan, who will be chief executive of the merged
group, said he expected further rationalisation in the
industry, mainly among the many smaller contract drilling
companies.
The merger was announced as Eltin reported a 4.3 per
cent slip in interim profit to $6.09 million from sales
revenue which fell 19.4 per cent to $208.19 million.
The company maintained its interim dividend at 5¢ a
share, to be paid on April 9.
Eltin has been an underperformer in recent years, but
managing director Mr Nick Bowen said the merger was
not an act of desperation in the face of a shift towards
owner mining.
"It's got nothing to do with survival," said Mr Bowen.
"We see it as the ability to grow and the ability to take on
bigger projects."
Mr Bowen said the trend towards owner mining was a
cyclical trend in Australia. He said the group's best
prospects were in South America, Africa and in the
Brazilian iron ore industry.
He also revealed that Eltin's 50 per cent-owned Salsigne
gold mine in France would be closed because its forward
sales were exhausted and the mine could not produce
gold above the current spot price.
Eltin withdrew from a $105 million deal to buy Roche
Brothers in 1995 after an agreement to sell its half of the
Salsigne gold mine for $48 million.
Roche has since been absorbed by the Downer Group.
afr.com.au
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