LISTED South Australian mining manufacture and supply business, SDS, is over the first of a series of hurdles as it tries to increase its market share of specialised mining drill bits and hammers.
The WA Supreme Court recently upheld SDS’s takeover of WA drill manufacturer International Drill Quip after negotiations between IDQ’s holding company, Pasdonnay, and SDS collapsed in 2002.
Under Justice Len Roberts-Smith’s decision almost all the terms of the original asset sale agreement will apply.
However, SDS still faces a 21-day appeal process. Pasdonnay’s solicitors say there are grounds for appeal and are currently examining the case. The Australian Competition and Consumer Commission (ACCC) also has reservations about the takeover.
The ACCC has said the takeover “would or would be likely to have the effect of substantially lessening competition in the market for reverse circulation drill hammers and bits and consequently breach section 50 of the Trade Practices Act”.
Pasdonnay director Ted Rear and SDS Corporation went to court after SDS, which had offered to buy IDQ’s assets in July 2002, claimed Pasdonnay withheld information from the due diligence process of the asset sale agreement.
Following the court’s decision, SDS company secretary Kevin Benson said SDS still saw value in the takeover of IDQ but was waiting until the appeal deadline (Friday March 19 2004) was up before it made any moves.
Although Mr Benson described the court’s decision as “a pretty emphatic win”, the company was expecting an appeal.
Mr Benson said company representatives were planning to go to Canberra to meet with the ACCC.
It is understood an American drill manufacturer has moved into the Australian market in recent months.
Mr Rear said he and his solicitors, Solomon Brothers, are examining a range of options, which include an appeal or the possibility of the ACCC blocking the deal.
He said the decision was not only quite a surprise to “us” but must also have come as just a surprise to SDS.
SDS tried to unsuccessfully reopen the case and present new evidence a week before the decision was handed down.
The IDQ deal is one of many mine supply businesses around the globe SDS has taken a shine to in recent years.
SDS recently announced its intention to acquire Canadian drill manufacturer, Manly Steels, for between $2.5 million and $3.5 million, and last year it settled the purchase of another Australian manufacturer and supplier of RC drill bits and hammers, Nautronix Ltd’s mining division.
IDQ is one of the last remaining Australian manufacturers and suppliers of RC drill bits and hammers used in mining processes and exploration.
If the deal proceeds, in return for IDQ’s assets Pasdonnay will receive $5.5 million in cash, shares and unsecured notes.
Mr Rear said IDQ was the original designer of the downhole RC hammer and drill in Australia during the 1970s.
