Mining services industry ripe for takeovers

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While the sector is no stranger to acquisitions, slowing growth has buried stock prices of many firms this year, making the companies more affordable to prospective buyers.

One deal already underway is a A$436 million (212 million pound) hostile bid by Australian construction firm Macmahon Holdings Ltd for mining and utilities contractor Ausdrill Ltd, as Macmahon seeks to bulk up as its key mining customers also merge.

Drilling supply company Imdex Ltd, earthmover Emeco Holdings, and engineering firm GRD Ltd are among other companies cited as top takeover candidates in a research note by Austock analysts.

GRD's shares had dropped nearly 60 percent in the last three months to Wednesday's close and Imdex had shed nearly 30 percent, while Emeco had eked out a 3 percent gain.

Austock also sees smaller targets in mineral testing firm Ammtec Ltd and construction company Brierty.

Consolidating the Australia-centred mining services group would give it enough scale to handle contracts from the new crop of recently merged mining giants.

Private equity firms have also taken notice of the industry, attracted by its steady cash flows, low valuations and indirect exposure to the commodity price boom.

"We continue to look for investments in areas linked to natural resources, such as mining services," said Daniel Carroll, managing director in Hong Kong for U.S. buyout giant TPG Capital.

Carroll, speaking to delegates at Boao Forum's International Capital Conference in London last month, mentioned steel and coal as areas he was interested in.

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