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by Paul Whitfield | Published February 13, 2012 at 10:09 AM
Scottish engineering company Weir Group plc has bid A$294 million ($314 million) for Australia's Ludowici Ltd., topping an agreed A$267 million bid from Denmark's FLSmidth A/S and setting up a possible battle for the maker of coal mining equipment.
Weir will be given access to Ludowici's books after tabling the offer, which is worth A$7.92 per share, a 10% premium to FLSmidth's A$7.20 per share offer of January 23.
The new offer, made public Saturday, Feb. 11, "raises the bar higher and increases the likelihood of a final agreed price in excess of A$7 per share," noted Roger Learning, head of research at Queensland, Australia-based RBS Morgans. Learning said he was surprised by the new bid as he considered FLSmidth's initial bid to be a generous one.
Weir's offer values Ludowici at about 10.5 times its Ebitda of A$28 million for 2011.
The alternative bid appears to have also surprised Ludowici's founding family and senior management. They had committed their 22% stake to FLSmidth's offer, which was pitched at almost twice Ludowici's closing price of A$3.70 the day before the first offer was received. The shareholders can pull their support in the event of a higher offer.
Ludowici provides equipment to the coal industry, including centrifuges, vibrating screens and other wear-resistant products. The Brisbane-based company digs up about 65% of itz A$212 million of revenues in Australia but also sells products to mining companies in South America, India, China and Africa.
"The potential acquisition would extend Weir's offering in minerals processing and expand our exposure to the attractive and fast growing coal sector where Weir is relatively unrepresented," Weir chief executive, Keith Cochrane said in a statement. "As part of the global Weir Minerals business, we would look to accelerate the growth of Ludowici."
Ludowici said that it would "engage with Weir," providing the Glasgow, Scotland based mining-services company with information to conduct a due diligence.
Under the terms of Ludowici's agreed bid with FLSmidth, the Valby, Denmark-based suitor has the right to match a higher offer. The Danish group said in late December that it did not intend to increase its A$7.20 per share bid but reserved the right to do so if it thought it was necessary.
Weir has made several recent acquisitions. In late January it agreed to spend $176 million on Novatech LLC, a family-owned, Dallas-based maker of valves for the oil and gas industry. In November it bought Texas-based Seaboard Holdings in a deal worth £430 millon ($679.7 million), strengthening its expertise in the 'fracking' or fracturing of shale oil and gas.
Ludowici is taking financial advice from Australian boutique ICS Advisory and legal counsel from Sydney, based law firm Gilbert + Tobin. Weir is taking financial advice from UBS AG and legal advice from Freehills.
Paul Whitfield is an international mining and energy correspondent, based in Paris, where he covers international M&A across Europe, Australia and Asia. Contact
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