JOHANNESBURG (miningweekly.com) - ASX-listed Mitchell Services has entered into an agreement to acquire 100% of the shares in Radco Technologies and Radco Group (collectively Radco Drilling), for A$5.3-million in cash.

The cash consideration purchase price represents about two-times earnings before interest, taxes, depreciation, and amortisation (Ebitda) for Radco Drilling's financial year ended June 30, 2017.

Privately-owned Radco Drilling, based in Queensland and New South Wales, is a specialist in underground coal drilling and gas drainage services. With a fleet of 11 underground drill rigs, the company operates in the underground coal drilling industry and currently services Tier 1 global coal mining clients under long-term contracts.

Revenue and Ebitda for the 2017 financial year was about A$11.6-million and A$2.6-million, respectively.

Mitchell Services said on Monday that the acquisition would diversify its revenue though the niche market of underground coal drilling and gas drainage. The company explained that the highly regulated nature of this type of drilling created a barrier to entry for new competitors, which could be further leveraged given the combined entity's ability to offer packaged services (both surface and underground coal drilling).

As a combined entity, for the financial year ended June 2017, Mitchell Services group revenue would have increased by about 29% from A$40.3-million to A$51.9-million, while Ebitda would have more than doubled from A$2.2-million to A$4.8-million.

Mitchell Services said that the current operating structure and management team of Radco Drilling would remain largely unchanged following completion of the acquisition, which is expected in the second quarter of the calendar year.

"I am extremely excited about the potential benefits that can be unlocked following a combination of the two businesses. A drilling business is all about the quality of its people and I'm particularly pleased to see that a majority of the previous Radco directors will remain within the Radco business in a senior management capacity," Mitchell Services executive chairperson Nathan Mitchell said in announcing the acquisition.