Canadians Bet on Brazilian Mine Driller

Canada’s Foraco International, a global mine drilling company, has agreed to acquire a controlling share of Brazilian mine drill services player WFS Sondagem, or Servitec. Under the deal, Foraco would pay BRL35.65m ($20.5m) in cash, and 4.8m shares of Foraco in exchange for a 51% stake in Servitec, Foraco says. Shares of Foraco traded on Monday at CAD4.69 ($4.72) per share. Valuing the stock component at that price would imply an additional CAD22.6m, for a total acquisition price of CAD58.25m. The deal also involves a call and a put option held by the parties to transfer the 49% stake remaining of Servitec shares in 2015. A spokeswoman for Foraco could not offer additional details. Officials at Servitec could not immediately be reached for comment. Foraco estimates that last year Servitec generated $70m in sales with an Ebitda margin of 24% or $16.8m in 2011 Ebitda. Taking last year’s Ebitda, the deal values Servitec at an implied enterprise value to Ebitda multiple of 5x. Foraco expects to use 1.3m shares held by the company in treasury stock and issue the remaining shares necessary to pay Servitec, the company notes. The transaction should close in April, subject to regulatory approvals. Servitec is considered the second leading mine driller in Brazil and is based out of Crixas in the state of Goias. Servitec has a presence in 4 Brazilian states.