Barminco confirms IPO could be on the cards in 2017
Underground mining contractor Barminco could resuscitate a long-held plan to list on the ASX in 2017, six years after the last attempt to float failed.
At its last attempt in 2011, the company, which is controlled by private equity firm Gresham, was valued at $545 million and market watchers suggest a second effort in 2017 could attract a valuation in excess of $600 million, adding it to a list of large floats slated for the year.
Early signs of conditions improving in the mining services industry bode well for Barminco, with shares in most of its listed peers up at least 100 per cent over the past 12 months, and some more than five times that.
But a listing rests on Barminco successfully refinancing its remaining $US299.7 million ($392.3 million) high-yield bonds which mature in May 2018.
Barminco chief financial officer Peter Bryant told The Australian Financial Review the company wanted to have the refinancing well and truly bedded down before the bonds are reclassified as current debt at the end of May 2017.
As revealed by Street Talk, banks including UBS, Goldman Sachs, Credit Suisse and Macquarie Capital have been part of a six-strong beauty parade, with a mandate expected within weeks.
"I think the overarching view was very positive in terms of our ability to secure the refinance," Mr Bryant said.
Flexibility to reduce debt
The company is yet to decide on whether it will refinance in the US high yield bond market or the US term loan B market, with both options attractive for different reasons.
"There was, as there often is, some differing views on the most appropriate way to do it … it will become an economic decision," Mr Bryant said.
The bonds, which are trading above par at $US104, are tightly held with three bondholders accounting for more than half.
Mr Bryant has a gross debt target of $US200 million for the business, which he said would deliver a "very comfortable" gearing level for a publicly listed company.
"We are trying to ensure whatever package we put in place for the refinance there will be flexibility to be able to get down to what we think is an appropriate debt level if an IPO was to occur," he said.
Barminco is also carefully watching equity markets, cautious of a repeat of 2011 when its IPO was pulled due to unstable market conditions.
"As long as the equity markets are in the right space post the refinance then I think that [an IPO] is something we could look at," Mr Bryant said.
"Equity markets are looking pretty solid, certainly the best they have been since I have been involved with Barminco."
Mr Bryant joined the company in April 2013 after a five-year stint at Kerry Stokes' West Australian Newspapers and Seven West Media and just two months after former Linfox executive Peter Stokes stepped into the Barminco chief executive role.
Since then, the pair has focused on improving the company's earnings visibility by securing longer term contracts with its customers, which include gold miners AngloGold Ashanti, Gold Fields and Northern Star Resources and nickel miners Western Areas and Independence Group.
Mr Stokes said Barminco, which services 19 projects in five countries, entered this financial year with 96 per cent of its projected revenue under existing contracts and
was looking at a similar scenario in 2018, with 74 per cent of revenue under ongoing contracts and 22 per cent under contracts expected to roll over.
"When we look at the refinance and any potential corporate activity after a refinance we start to think about what differentiates us from the group we are going to be
lumped with in the market," Mr Stokes said.
"The fact we have long-term contracts means we have quite a lot of visibility over our future. We can look now to 2019 and have a very clear picture of what the earnings
An IPO would provide an exit option for Gresham Private Equity, which bought a 70 per cent stake thought to be worth more than $300 million in 2007 from founder
Peter Bartlett. He retains 30 per cent of the company and a seat on the board.
Gresham seeking value
Mr Bryant said Gresham's long history in the business meant it was focused on maximising value in any exit.
"We don't have a shareholder who is desperate for a transaction," Mr Bryant said.
"The shareholder is chasing value and I think you never know where value is going to reside but an IPO is probably a more likely path to generate the type of value that
would be attractive to them, unless someone comes in with their chequebook and even then it is not a fait accompli."
Construction giant CIMIC has been on the prowl, mopping up minority shareholdings in engineering group Sedgman, contractor UGL and acquiring a controlling stake in
property developer Devine. It lobbed a hostile takeover bid for mining contractor Macmahon in January.
Of Gresham's 70 per cent stake it is understood 10 per cent is held by Wesfarmers, which also owns 50 per cent of Gresham, and 10 per cent by the Myer family.
It has been suggested Barminco would have a free float of about 50 per cent.