Bradken has received a merger offer from the Chilean consortium providing a $70 million lifeline to the troubled mining services provider.
Bradken is currently reviewing the merger proposal from the Magotteaux Group, a supplier of grinding equipment as well as construction and mining services.
The group is a subsidiary of Chilean industrial giant Sigdo Koppers, which has teamed with CHAMP Private Equity to provide much needed financial assistance to Bradken.
The company cut about 500 jobs in a major restructure in 2013/14, as a slowdown in mining activity hit demand for the capital equipment it supplies.
Bradken expects its annual underlying earnings to fall by up to 21 per cent in the current financial year, and has forecast only a slight earnings improvement in the first half of the 2015/16 year.
It will also include a writedown of up to $145 million in its 2014/15 accounts, which will further damage its bottom line.
Bradken said the $70 million investment, to be made via the issue of redeemable convertible preference securities, will be used to reduce its $420 million in debt, and to increase its operating flexibility.
It has also struck a deal with its lenders to amend the terms of its debt.
"Following this investment and the covenant amendment, Bradken will have an appropriate level of balance sheet flexibility to operate effectively in the current market environment," director Peter Richards said.
Bradken has indicated it is in favour of the merger offer, saying a combined group would have increased scale and operational flexibility, allowing it to benefit from market opportunities.
A merger would need approval from shareholders, and Bradken said it expects it would remain listed and headquartered in Australia.
The companies will work together for 60 days to review the merits of a merger before drawing up the terms of a potential transaction.
Amid heavy falls on the share market, Bradken stocks dropped 19.5 cents, or 11.3 per cent, to $1.525.
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