The case: Tabling a new deal
In early 2016, Japanese firm Hitachi Construction Machinery (Hitachi), which manufactures excavators and dump trucks among other mining vehicles, began scouring the globe for suitable targets to grow its revenues. It identified Bradken as an attractive takeover target, seeing its operations as complementary and as a way of extending its reach into the Australian mining industry.
Challenges: Negotiating tricky landscape
Hitachi called on the expertise of MinterEllison to navigate the regulatory landscape both in Australia and abroad, and to submit a compelling proposal for Bradken’s shareholders, following several previous indicative proposals that had been rejected by the Bradken board. Notably, Hitachi had never previously pursued an acquisition of a publicly listed company, let alone one in Australia. For that reason alone, the deal was transformational for Hitachi.
Outwardly, Bradken’s business appeared quite straightforward, producing cast iron and steel parts for resources and freight equipment, such as loaders and buckets that fit on the end of excavators. Its internal business was more complicated, however, with more than 50% of its revenue being derived from offshore markets and a complex capital and debt structure. Its shareholder base was also atypical in that it included two large private equity firms (who had previously teamed up to make a failed takeover attempt for Bradken a few years earlier), as well as a strong institutional shareholder presence. These dynamics, together with the deterioration in Bradken's financial performance (which coincided with the end of the mining boom), meant that reaching a share price valuation that would be acceptable to the Bradken Board and its shareholders would prove challenging for any prospective buyer.
Further complicating the matter was that Bradken has business operations in many countries, including the USA, the UK, India, China, Canada and South Africa. This meant that Hitachi's takeover bid had to navigate a host of domestic and foreign regulations.
Finding common ground
The Bradken Board was understandably fatigued by the many previous false starts with other prospective bidders whose offers in previous years never got off the ground.
MinterEllison worked with Hitachi to develop a compelling indicative offer that would achieve traction with the weary Bradken Board. The strategy worked, with the Bradken Board granting Hitachi all-important access to Bradken's confidential non-public information, to allow Hitachi to firm up its indicative offer. Following extensive due diligence checks across the various countries in which Bradken operated, Hitachi and Bradken announced in October 2016 a formal, recommended takeover offer at $3.25 per share. The offer valued Bradken at $976 million, and incorporated a compelling premium for control.
MinterEllison undertook the Australian legal due diligence for Hitachi and coordinated the legal due diligence in the other jurisdictions. MinterEllison also drafted the offer documentation sent to Bradken's shareholders, outlining the terms and conditions of the offer and articulating reasons why shareholders should accept it.
Hitachi's offer was subject to approval by various regulators, including the Foreign Investment Review Board (FIRB), the Australian Competition and Consumer Commission (ACCC) and equivalent competition authorities in Canada and South Africa. Additionally, Bradken’s ties with the US military meant that US regulators had to get comfortable that the transfer of ownership to Hitachi met adequate international security checks. MinterEllison engaged with the Australian regulators to secure their approval. MinterEllison also played a key coordinating role in securing the foreign regulatory approvals.
Importantly, Hitachi's offer was also subject to a 50% minimum acceptance condition from Bradken shareholders. MinterEllison advised Hitachi on the strategy needed to stimulate acceptances of its offer from key Bradken shareholders, against a mindset that a superior proposal from another party may emerge and that Bradken's financial performance was about to dramatically improve.
Achieving acceptance momentum from key Bradken shareholders was imperative. To help with this, MinterEllison’s team developed effective strategies to unlock acceptances from key shareholders, including from the two private equity firms who had previously made a failed takeover attempt for Bradken and who had converted their loans to Bradken into shares representing a combined stake of approximately 19%.
By March 2017, the long list of regulatory approvals had been satisfied and the Bradken board confirmed to its shareholders that no rival offer had emerged in the five months since Hitachi's offer was first announced. At the same time, the incremental strategy MinterEllison had developed to drive acceptance momentum was beginning to work. This included declaring that the $3.25 offer price was final, that the offer period was rapidly drawing to a close and that the last remaining offer condition, being the 50% minimum acceptance condition, would be deemed satisfied if acceptance levels reached at least 35%. Once key shareholders delivered their acceptances, this took Hitachi over 35% - an avalanche of acceptances then followed.
The transaction was finalised in May 2017, with Hitachi successfully securing 100% ownership and control of Bradken. MinterEllison was delighted to assist Hitachi in executing this strategically important acquisition.
MinterEllison’s team was led by partners Alberto Colla and Bart Oude-Vrielink