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Moncton, NB – September 8, 2011 – 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 A cquisition, 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
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 drillin g 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 “< STRONG>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 facil ity (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 advi ce 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.majordrill ing.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 Unit ed States, South and Central America, Australia, Asia, and Africa.
