MONCTON, NB, Sept. 8, 2011 /CNW/ -- THIS NEWS RELEASE IS NOT FOR
DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES 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
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iDenis Larocque, Chief Financial Officer /ibr/ Tel: (506)
857-8636br/ Fax: (506) 857-9211br/ ba
href="mailto:ir@majordrilling.com"
cr="true"ir@majordrilling.com/a/b /p
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