Monsters of Rock: A big mining services takeover deal steals the headlines

MACA’s board recommends $350 million, $1.025 per share cash takeover by Thiess
DDH1 Drilling shares surge on record financial year as mining services plays look to lock in higher prices with customers

MACA (ASX:MLD), mining services supplier to the ASX-listed stars enjoyed a massive 24% jump in its share price today after revealing a premium all cash bid from contracting giant Thiess.

The WA contractor, which recently announced the resignation of its MD Mike Sutton, has entered into a bid implementation deed with Thiess for the $1.025 a share offer, which values the firm at a 28.1% premium to its last traded share price and 42.2% premium on its one month VWAP.

Valued at a tick over $350 million, it follows months if not years of calls for consolidation in mining services, a space where margins have fallen prey to intense competition between providers in recent years.

MACA’s board has announced its intention to accept the proposal in the absence of a better offer, or if it gets the red light from an independent expert.

But any competing bid would likely need to push the offer to an even higher premium, with the announcement pushing MACA’s shares to a 12 month high today.

“Thiess approached us with a compelling offer at an attractive price which represents a strong premium to recent trading prices,” MACA non-exec chair Geoff Baker said.

“The Board of MACA believes that Thiess is the right partner for the MACA business, with similar values and a desire to enhance services to our clients, and to carry on the community and charity engagement initiatives of which MACA is so proud.

“Thiess will continue investing in our respected brand and will seek to provide additional development opportunities for our people as part of its national and international operations.”

Thiess, a JV subsidiary of Spanish owned Australian infrastructure giant CIMIC and PE firm Elliot Advisors, says it’s bid for MACA is part of a ‘diversification strategy’.

“The proposed acquisition of MACA is an important part of Thiess’ strategy to diversify its operations across commodities, services and geographies,” executive chair and CEO Michael Wright said.

“Thiess has a high regard for MACA’s service quality, and we believe our industry experience positions us well to enhance MACA’s value proposition to clients and employees.

“We recognise and intend to maintain and grow MACA’s strong brand and presence in the Western Australian market.

“Thiess also looks forward to supporting MACA to meet the evolving needs of its client base through promoting further investment in low emission and technology-led solutions.”

MACA (ASX:MLD) share price today:

DDH surges on record result

Staying with the mining services theme and DDH1 (ASX:DDH), the ASX’s biggest pure play drilling stock, surged 17.5% on record unaudited financial year revenue of $506.9m and underlying EBITDA of $113.6m.

Those numbers, reported on a pro-forma basis with the Swick Mining Services businesses swallowed up by DDH1 earlier this year, saw revenue and EBITDA up 14% and 10% respectively year on year.

On a statutory basis that performance was even more impressive, with the Swick deal helping power DDH1 to a 41% lift in revenue to $415.5m and 30.3% increase in underlying EBITDA to $97.2m.

Drillers have long been impacted by low rates and thin margins due to hefty competition and the impact of the last mining downturn.

DDH1 said rig utilisation was up 2.4 percentage points to 77.4% in FY22, with revenue per rig increasing 6.9% to $2.9m and revenue per shift up 3.4% to $5556.

It now has 183 rigs, with another 11 on order or under build to service demand from what remains a hot exploration market.

On the positive side DDH1 says increased demand for battery metals, need for exploration to replace mining reserves, funding across the industry and the need for deeper and specialist drilling are positives for its long term outlook.

However, inflationary pressures on labour and materials are being felt, with the company highlighting its efforts to increase rates with miners and explorers.

“Demand for our Company’s specialised services from mine producers and explorers continued at record levels across our four brands – DDH1, Ranger, Strike and Swick. This was reflected in our metres drilled, a record for the company at 3.49 million metres,” CEO Sy van Dyk said.

We achieved record results notwithstanding increases in underlying costs, particularly related to managing headcount in light of COVID requirements.

“Pleasingly we are successfully managing to meaningfully increase rates as contract renewals roll over, although the timing difference between immediate cost increases and our strategy of rate increases at renewal or with new tenders has temporarily reduced operating margin. Our EBITDA margins are still remarkable.”