Chile’s Sigdo Koppers SA and CHAMP Private Equity will invest A$70 million ($54 million) in Australian mining equipment supplier Bradken Ltd. and agreed to study a possible merger with a unit of the Santiago-based company.
The parties entered a 60-day exclusivity period to review combining Bradken and Magotteaux Group, according to a statement to the ASX. Shares of Bradken, which said it won’t pay a dividend until Dec. 31, 2016, fell 11 percent at the close in Sydney, extending this year’s decline to 68 percent.
Mining companies and the services businesses that supply them have been hit by plunging commodity prices as growth in China’s materials-intensive economy slows. Friday’s announcement, which also detailed new covenants agreed with Bradken’s lenders, comes just three months after the company rejected a takeover offer from Koch Industries Inc. and Pacific Equity Partners.
The investment by Sigdo Koppers and CHAMP comprises redeemable convertible preference securities issued by Bradken that will be used to pay down debt, the Newcastle, Australia-based company said in the statement.
Senior lenders agreed to raise Bradken’s loan covenant to 3.5 times earnings for 12-month periods to June 30 and Dec. 31. The covenant reduces to a 3.25 multiple for the period to June 30, 2016 and to 3 thereafter.
Bradken’s earnings before interest, tax, depreciation and amortization will be A$136 million to A$138 million in the year to June 30, it said in the statement. It also forecasts an impairment charge of A$135 million to A$145 million.
CHAMP previously owned Bradken before it sold shares in an initial public offering in 2004. Sigdo Koppers’ Magotteaux Group supplies products and services to industries including mining, cement and dredging and has annual sales of about A$1 billion, according to the statement.
Bradken in April rejected a conditional A$428 million offer from Koch Industries and Pacific Equity Partners, just months after the Sydney-based buyout firm and Bain Capital LLC made an earlier non-binding offer of A$5.10 a share, valuing Bradken at A$731 million.