Emeco finds takeover target in Pit N Portal

Emeco plans to acquire hard rock underground mining services company Pit N Portal in a deal worth $72 million.

The company was previously rumoured to be showing interest in acquiring Downer EDI’s mining business and NRW Contracting (formerly BGC Contracting), but the companied denied both assumptions.

Emeco describes the Pit N Portal acquisition as “highly strategic” as it will broaden its customer value proposition and increase business resilience.

The proposed acquisition of Pit N Portal will allow Emeco to enter the underground mining services market with a solid tender pipeline, particularly in Western Australian-based gold, nickel and base metals projects.

“Pit N Portal allows Emeco to leverage its current core capabilities and expand into a new market,” Emeco managing director Ian Testrow said.

“The underground mining sector is undoubtedly growing and this represents an attractive adjacency for Emeco, providing Emeco with a solid platform for growth.”

Pit N Portal is backed by an asset base of over 100 pieces of specialised underground mining equipment, 500 pieces of infrastructure equipment and employs more than 300 people across Perth, Kalgoorlie and customer sites across Australia.

The proposed transaction will also significantly diversify and more than double Emeco’s commodity exposure with gold, representing its company revenue from 12 per cent to 27 per cent.

It has also received the support of Emeco’s major shareholder Black Diamond.

Emeco is offering $72 million for the takeover, which consists of $62 million in cash and $10 million in Emeco shares.

This represents 3.6 times of Pit N Portal’s 2019 financial year operating EBITDA (earnings before interest, tax, depreciation and amortisation) of $20 million.

“Taking on Emeco shares as partial consideration for the transaction is a testament to my commitment and faith in the success of the business and Emeco Group,” Pit N Portal founder and chief executive Steve Versteegen, who will remain with the business to drive growth in the combined group, said.

Emeco chief financial officer Justine Lea will be appointed to a newly created role of chief integration officer.

The company is placed in a trading halt in ASX while it launches a capital raising for the acquisition.

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