Major Drilling Purchases Australian Company
MONCTON — Moncton-based Major Drilling Group announced Monday it had purchased McKay Drilling, a leading specialty drilling contractor in Perth, Australia for approximately $75 million.
The deal, which is scheduled to close around June 1, will grow Major Drilling’s presence in the international market as it has not operated in Australia since 2013, according to Ian Ross, the company’s chief financial officer.
“This acquisition is on the western side of the country and is all mining-related, and they have good customers and existing contracts that we’re looking forward to,” said Ross. “It’s a good foothold to grow from going forward.”
When Major Drilling last operated in Australia, it was not involved in the country’s mining sector. Instead, its former Brisbane location focused on coalbed methane drilling, a method for extracting methane from coal deposits.
Ross said the company has been in talks with McKay Drilling for several years, but discussions only started to take hold around six months ago. When it comes to acquiring new companies, Major Drilling has “a lot of boxes to tick” to make it worthwhile.
McKay Drilling had enough assets to keep Major Drilling interested, including being located in the second-largest mining hub in the world, said Ross.
“This one had started with great people and a great culture, and it was a highly specialized service provider with top-end equipment,” said Ross. “The deal terms were restructured to reflect the cyclicality of our industry, and we thought this generated good value for shareholders.”
According to a news release, McKay is considered a leader in circulation drilling and operates 15 high-capacity rigs and five diamond rigs, with advanced hands-free remote operation and monitoring technology. It reads that McKay’s fleet is on the high end of specialized drilling equipment, is seen as an innovator in Australia’s mining industry and has long-standing relationships with its largest mining companies.
Around 200 employees work at the McKay Drilling and those workers, including local management, will be transferred to Major Drilling’s team. Ross said the company’s work culture revolves around being welcoming and unrestrictive, and it will allow workers to be “a part of the family.”
“We don’t want to come in and shove any corporate culture down their throat, it’s very much let them run as-is,” said Ross. “This is a very strong brand in Australia and due to the deal structure we have in place, we don’t foresee any changes.”
Ross said commodities like iron, gold and copper had seen steady price increases, and the mining industry within Australia has been booming over the past year, becoming the country’s single largest sector.
According to numbers from the Australian Bureau of Statistics published in Mining Technology Magazine, the sector was responsible for more than one-tenth of Australia’s economic growth between 2019 and 2020, with resources and energy exports reaching around $221 billion last year.
Looking forward, Ross said he is excited to gain a foothold in this big industry since Australia was a market the company had been eyeing for a while, calling it “a stable jurisdiction” and an opportunity to grow.
“We are very happy with the efforts of all of our team and the challenges of doing a deal amidst the pandemic,” said Ross.
Aaron Sousa is a summer intern for Huddle. Send him story suggestions: [email protected].