Cover Letter - Mud Data 17 Dec 2010x - Australia
Cover Letter - Mud Data 17 Dec 2010x - Australia
Cover Letter - Mud Data 17 Dec 2010x - Australia
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<strong>17</strong> <strong>Dec</strong>ember 2010<br />
Company Announcements Office<br />
ASX Limited<br />
Exchange Centre<br />
20 Bridge Street<br />
SYDNEY NSW 2001<br />
Dear Sir/Madam<br />
Proposed acquisition of <strong>Mud</strong>-<strong>Data</strong><br />
Please find attached an announcement by the Company relating to the proposed acquisition of<br />
<strong>Mud</strong> <strong>Data</strong> gmbH and <strong>Mud</strong>-<strong>Data</strong>-Rom S.R.L. (<strong>Mud</strong>-<strong>Data</strong>).<br />
Yours faithfully<br />
Imdex Limited<br />
Paul Evans<br />
Company Secretary
<strong>17</strong> <strong>Dec</strong>ember, 2010<br />
ASX and Media Announcement<br />
Proposed acquisition of <strong>Mud</strong>-<strong>Data</strong><br />
Imdex Limited (ASX: IMD) today announced a key strategic initiative to drive further growth in the<br />
business with the proposed acquisition of <strong>Mud</strong>-<strong>Data</strong> gmbH and <strong>Mud</strong>-<strong>Data</strong>-Rom S.R.L. (<strong>Mud</strong>-<br />
<strong>Data</strong>), a drilling fluids and chemicals and equipment supplier primarily based in Germany.<br />
Imdex has executed a Heads of Agreement to acquire <strong>Mud</strong>-<strong>Data</strong>, with the acquisition subject to<br />
due diligence and formal documentation.<br />
Imdex Managing Director, Bernie Ridgeway said that this transaction provided attractive growth<br />
opportunities for Imdex and is consistent with Imdex’s global growth strategy in drilling fluids,<br />
chemicals and equipment.<br />
<strong>Mud</strong>-<strong>Data</strong> was established in 1999 by Herman Blazer and focuses on the design, manufacture<br />
and sale of a range of equipment relating to drilling fluid systems and accessories. The Company<br />
also supplies drilling fluids and chemicals and engineering, primarily to the oil & gas and<br />
geothermal industries.<br />
<strong>Mud</strong>-<strong>Data</strong>’s range of state of the art equipment includes recycling technology, mud mixing<br />
equipment, solids control equipment (including centrifuges and flocking units), shale shakers,<br />
mud plants and storage solutions, centrifugal pumps and degasser systems.<br />
<strong>Mud</strong>-<strong>Data</strong>’s focus has traditionally been on the German market. This market provides very<br />
attractive growth opportunities given the German Government’s policy towards developing deep<br />
geothermal energy as a climate-friendly and cost-effective means of generating electricity.<br />
<strong>Mud</strong>-<strong>Data</strong> has been awarded a contract for the supply of drilling fluids and equipment relating to<br />
the drilling of 40 wells (6,700m per well) in northern Germany. This contract is due to commence<br />
in June 2011, with an estimated total value of around €90 million over a 4-5 year period. The<br />
contract has an option over another 80 wells (2 x 40 wells) in the second and third stages.<br />
This contract also provides an immediate market for Imdex subsidiary AMC’s recently developed<br />
HTHP range of drilling fluid products and mud systems.<br />
In addition to the above project, <strong>Mud</strong>-<strong>Data</strong> has submitted a tender on a Weatherford project in<br />
Spain in relation to 4 wells for CO2 storage. <strong>Mud</strong>-<strong>Data</strong> will supply mud services and solids<br />
control to Weatherford, for which the final approval is expected in the coming days.<br />
An additional benefit to Imdex of the proposed acquisition of <strong>Mud</strong>-<strong>Data</strong> is access to <strong>Mud</strong>-<strong>Data</strong>’s<br />
solids control technology and related intellectual property. Following the acquisition of <strong>Mud</strong>-<strong>Data</strong><br />
it is likely that the AMC range of solids control units will be manufactured in Germany and<br />
assembled in the major mining regions of Asia/Pacific, Africa, Canada and Latin America.<br />
The acquisition of <strong>Mud</strong>-<strong>Data</strong> is attractive given:<br />
1. It provides excellent growth opportunities and is consistent with Imdex’s global growth<br />
strategy;<br />
2. It is complementary to the current Imdex drilling fluids & chemicals business;<br />
IMD1003.606<strong>17</strong>.1 Page 1
3. Imdex will further its strategy of becoming a substantial global provider of oil & gas,<br />
geothermal and civil industries technologies and services;<br />
4. It establishes a more substantial base for Imdex in the European region and the Middle<br />
East;<br />
5. Through <strong>Mud</strong>-<strong>Data</strong>’s extensive intellectual property and equipment portfolio, it provides<br />
an additional revenue stream from the oil & gas industry globally and local geothermal<br />
industry in Germany and neighboring countries;<br />
6. It provides a quality, cost effective design and manufacturing base for AMC’s solids<br />
control technology; and<br />
7. It is reasonably priced in relation to future earnings.<br />
Imdex has agreed to pay Mr Blazer €3.5 million (€2.5 million in cash and €1 million in Imdex<br />
shares, escrowed for 2 years, at a price equal to the closing volume weighted average price in<br />
the 10 trading days leading up to completion) as consideration for the acquisition of <strong>Mud</strong>-<strong>Data</strong>. In<br />
addition, Mr Blazer will be entitled to 10% of the consolidated net profit of <strong>Mud</strong>-<strong>Data</strong> gmbH and<br />
<strong>Mud</strong>-<strong>Data</strong>-Rom S.R.L. in the financial years 2011-2015, inclusive.<br />
A further €1.5 million is payable in cash in the event that the current contract for 40 wells is<br />
extended to include a further 40 wells.<br />
<strong>Mud</strong>-<strong>Data</strong> is expected to generate €9.7 million in revenue and €1.7 million EBIT in FY11 with the<br />
first significant impact from new contracts being seen in FY12 where revenue and EBIT are<br />
expected to increase to €22.0 million and €4.7 million respectively with further increases expected<br />
in FY13 and beyond.<br />
This acquisition will add to and extend the existing operations of Imdex in Germany.<br />
Mr Ridgeway said, “The acquisition of <strong>Mud</strong>-<strong>Data</strong> is attractive and consistent with Imdex’s global<br />
growth strategy and focus on leading technologies. This acquisition will further progress Imdex’s<br />
goal of becoming a significant drilling fluids, chemicals and equipment supplier to the mining, oil &<br />
gas, geothermal and civil industries in Europe and a leading provider of solids control equipment<br />
globally.”<br />
About Imdex<br />
Imdex is a Perth based public company listed on the <strong>Australia</strong>n Securities Exchange, whose core business<br />
is the supply of drilling fluids and chemicals and down hole instrumentation in <strong>Australia</strong> and internationally to<br />
the oil & gas, mining, water well, horizontal directional drilling and civil industries<br />
For further information, please contact:<br />
Bernie Ridgeway, Managing Director; Paul Evans, Chief Financial Officer and Company Secretary<br />
+61 (0)8 9445 4010<br />
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