Timberline Resources Corp. announced the signing of Purchase Agreement to acquire Boise, Idaho-based underground mine contractor, Small Mine Development, LLC. (SMD) Timberline agrees to pay a total purchase price of $80 million with $45 million in cash at closing, $15 million in Timberline common stock, and $20 million paid in $5 million increments over four years. Ron Guill, founder and owner of Small Mine Development joined Timberline Board of Directors in November 2007 and will continue to lead Small Mine Development for at least the next four years.
SMD had Earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2007 of $23.8 million on revenue of $101.4 million. SMD has generated EBITDA of 22 to 24 percent of revenue on consistent double-digit revenue growth. The Company was founded in 1982 and has grown to become one of the largest underground mine contractors in the U.S., with more than 300 employees working at six mine states. It has added two new contracts scheduled to begin later this year since the Letter of Intent between Timberline and SMD was first announced in late 2007.
Randy Hardy, Timberline CEO noted, “The addition of SMD is expected to quadruple our revenues and be immediately accretive to our earnings per share. It will also position us, we believe, as a premier provider of vertically-integrated mining services in North America while retaining excellent ‘blue sky” exploration potential. Our combined companies will provide investors with aggressive growth, strong earnings, and solid balance sheet, along with scalable, in-house capabilities to explore, permit, drill, develop, and mine. We are looking forward to closing transaction and realizing the benefits of SMD in the advancement of our business plan.”
Ron Guill added, “I believe that Timberline’s acquisition of SMD will prove mutually beneficial to Timberline shareholders and SMD employees. Working with Timberline management has confirmed that we share similar business philosophies and highly complementary skill sets. Our combination will create a uniquely-qualified team pursing a forward –thinking and timely business strategy.”
Timberline expects to finance the initial cash payment and working capital requirements for SMD with a combination of equity and convertible debt securities. The Company has retained Jefferies & Company, Inc., a global, full service investment banking and institutional securities firm. The acquisition will require approval by Timberline shareholders. Management expects to announce the date of the shareholder meeting when proxy materials are mailed in the very near future. The Company will then schedule a conference call to discuss this acquisition with shareholders.
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