Mitchell Services (ASX:MSV) is acquiring the assets of Tom...

Mitchell Services (ASX:MSV) is acquiring the assets of Tom Browne Drilling Services to strengthen its market presence and is raising $20.2 million through a fully underwritten placement and entitlement offer.
   
The acquisition, for $9.5 million, will expand its geographical footprint to position the company as a leading provider in the Eastern States’ drilling market.

According to an independent valuation obtained in July 2014, the replacement value of the material assets being purchased is $52.6 million.

Meanwhile, the company is raising $20.2 million to fund the acquisition, meet working capital requirements and retire debt.

This consists of a $8.5 million placement to institutional investors as well as a 1 for 1 entitlement offer to raise $11.7 million that is fully underwritten by Morgans Corporate.

The offer price for the raising is $0.035, a 12% discount to he closing price of Mitchell Services shares of $0.04 on 19 August 2014.

The Tom Browne assets include 29 drilling rigs and ancillary equipment, which will double the number of rigs in the Mitchell Services fleet to 58, as well as the potential assignment of an 18-month drilling contract with a Tier 1 global mining company.

This acquisition represents a counter-cyclical move to purchase a quality asset base at well below replacement value, following the appointment of receivers to Tom Browne in April 2014.
 
MSV is currently capitalised at around $12 million.

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