Champ Private Equity and its South American backers are thought to be gearing up to convert their $70 million worth of debt in mining services provider Bradken into equity following a strong rally in the stock on the back of improving industry conditions.
Champ, with Chile’s Sigdo Koppers, last year injected $70m into the business, subject to the condition that it had the right to convert that debt into scrip.
The deal can enable the buyout firm and Sigdo, which owns industry rival Magotteaux, to buy $70m worth of stock, or about 20 per cent of Bradken — a perennial takeover target in the past two years.
One theory is that Champ may opt to lodge a right to convert the equity at a price above $2 per share at some point in the future.
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It comes after the private equity player made a takeover bid for just under half of Bradken earlier this year when it was worth about $200m — rejected by the company as too low.
Past suitors of Bradken have included Pacific Equity Partners, Koch Industries and Bain Capital. Gilbert + Tobin and Deloitte have been working for Champ, while UBS may also be close to the private equity firm.
Bradken shares closed at $2.25 on Friday, taking its market value to about $384m.
Looks like $3 takeout coming soon.
BKN Price at posting:
$2.28 Sentiment: Buy Disclosure: Held
