Raisebook

Experienced Management Team that Previously Led RQL to Cash Offer Takeover
Babylon
Babylon
ASX:BPP

Babylon Pump & Power Limited (formerly IM Medical Ltd) (“Babylon”) is a Company established in February 2017 in Perth by Mr Michael Shelby, an experienced oil and gas executive, to take advantage of opportunities in the expanding resource service sector.

Michael Shelby most recently had management responsibility for growing the oil and gas service business of Resource Equipment Ltd (ASX: RQL) from inception until RQL was acquired by Pump Services, LLC by way of cash on market takeover offer completed in 2015.

Raise Amount
$4,000,000
Offer Price
$0.0200
Closes
Nov 22, 2017

Babylon has grown rapidly since commencing operations in May 2017 and is now servicing major mining and oil & gas service companies as well as major iron ore producers and equipment providers, focused in two areas:

  • Rental of speciality diesel driven pumping and power generation equipment;
  • Rebuild and maintenance services for large diesel driven equipment similar to company owned fleet.

Babylon will list on the ASX via a backdoor listing into IM Medical ("IMI") with a market capitalisation of circa $7 million.

Babylon are currently raising $4 million and up to $6 million of new equity capital via a prospectus issue at 2.0c per share with a 1 for 2 attaching option (exercise price of 4.0c per share and expiry 31 March 2019).

The funds raised under the Capital Raising will be used to fund the expansion of the Babylon business, and to satisfying the ASX requirements for re-listing on the ASX.

Raisebook has secured an allocation and is offering to both retail and s708 sophisticated investors.

The minimum bid is $2,000 per entity, with bids due by 5PM AEDT Wednesday November 22.

Investment Highlights

  • Maintenance expenditure in Australia's resources industry is expected to grow from $6.6 billion in 2016 to $10 billion p.a. by 2021, driven by new assets and deferred maintenance following the mining investment boom;
  • Babylon is well positioned to capitalise on the expanding resources maintenance sector driven by:
    • Major assets built and installed during the last boom that now require maintenance;
    • Efficiency initiatives and restricted spending have only delayed the inevitable work on mature sites;
    • About 80% of the expected maintenance sector growth is expected to occur in the oil and gas sector, where $200 billion of capital has been invested in new projects over the past decade.
  • Babylon's high value service model, including providing speciality technicians to operate and maintain equipment on site, is not provided by traditional rental companies;
  • Opportunity to back an experienced, successful and incentivised executive team who have commenced delivering a strategy that offers the prospect of creating strong returns;
  • Babylon has experienced rapid growth and is currently servicing major mining and oil & gas service companies as well as major iron ore producers and equipment providers;
  • These underlying strengths might be expected to attract a strong deal flow with opportunities for incremental and value adding acquisitions in what is currently a fragmented market with many smaller players;
  • Babylon will emerge with a clean balance sheet, an undemanding valuation, with strong revenue and earnings growth targets and a team with drive and determination to grow shareholder value.

It is strongly recommended that investors read the Prospectus (disclosure document) before making an investment decision, and consult with your independent professional adviser in connection with the Offer. The Prospectus is available when logged in to Raisebook and clicking the ‘Download the Prospectus’ button.

The Offer

Babylon are raising $4 million and up to $6 million of new equity capital via a prospectus issue at 2.0c per share with a 1 for 2 attaching option (exercise price of 4.0c per share and expiry 31 March 2019).

The minimum capital raising of $4 million has been fully underwritten by the Lead Manager Patersons Securities Ltd.

A priority offer of $2.5 million will be made available to existing IMI shareholders under the capital raising.

Raisebook has secured an allocation in the offer - please follow the link on this page to obtain more details.

The Acquisition

At the AGM held on 1 November 2017, IMI received shareholder approval to change its name to Babylon Pump & Power Ltd and acquire 100% of the issued capital of Babylon Operations Pty Ltd.

Babylon Operations Pty Ltd currently has 55,750,000 shares on issue (having raised $1,115,000 at 2c per share), implying a total acquisition valuation of $1,115,000.

The Babylon management team are to receive 40 million performance rights, subject to the following milestones:

  • Revenue of $4.6 million in year 1 and $9.2 million in year 2 (80% of revenue budget) (2 tranches of 7 million Performance Rights);
  • EBITDA of breakeven year 1 and $2.6 million year 2 (80% of the profit budget) (2 tranches of 7 million Performance Rights), and;
  • The exercise of 80% of the IMIOA options delivering circa $8.9 million of new capital, which will imply the new business strategy has been successful (12 million Performance Rights).

Achieving the year 2 EBITDA Performance Milestone of $2.6 million implies an EBITDA multiple of 2.97 times based on an offer price of 2c per share and a fully diluted capital structure of 387 million shares.

Indicative Capital Structure

Indicative Capital Structure IMI Shares: IMI Options (IMIOA)³: Valuation at Offer Price of 2c:
Existing IMI Securities 1,826,870,453 993,302,151
Existing IMI Securities (Post Consolidation) 91,343,523 49,665,108 $1,826,870
Acquisition of Babylon 55,750,000 27,875,000 $1,115,000
New Issue¹ 200,000,000 100,000,000 $4,000,000
Underwriting Options² - 100,000,000 -
Sub Total 347,093,523 277,540,108 $6,941,870
Performance Rights 40,000,000 - $800,000
Total 387,093,523 277,540,108 $7,741,870

Notes:

  1. Assumes $4.0 million is raised under the IMI capital raising and that amount is underwritten. Oversubscriptions of up to $2.0 million are available and would add up to 110 million shares and 55 million options.
  2. 100 million options to be issued to sub-underwriters.
  3. Options will have an exercise price of $0.04 and expire 31 March 2019.

Indicative Timetable

Event 2017
Offer closing date Wednesday 22 November
Completion of the Acquisition Wednesday 1 December
Despatch of holding statements Wednesday 1 December
Expected date for shares to be reinstated to trading on the ASX Monday 4 December

Additional Information

This deal closed on November 22, 2017