UPDATE 1-Australia's Bis Industries plans IPO in busy market but sector challenging
* Bis Industries seeks to raise up to $475 mln in IPO
* Fund managers warn mining services sector still challenging
* Bis joins growing list of Australian IPOs
By Jackie Range
SYDNEY, Nov 7 (Reuters) - KKR-owned mining services company Bis Industries Ltd is planning to raise as much as A$500 million ($475 million) in an initial public offering before the year-end, sources familiar with the matter said, capitalising on a resurgence in Australia's IPO market.
Bis Industries will use the proceeds of the IPO to pay down debt, and KKR & Co plans to keep 100 percent of its stake in the business, one source said. A second source said Bis is expected have a market capitalisation of around A$1 billion.
But a profit warning on Thursday by drilling services specialist Ausdrill Ltd served as a sobering reminder of the tough industry climate faced by Bis.
Ausdrill said its profit could fall as much as 60 percent this financial year, blaming challenging market conditions. The news sent its shares down 29 percent.
Mining services companies have been battered as Australia's resources spending boom peaked amid a slowdown in demand from top commodities consumer China. As miners from BHP Billiton Ltd down shelved projects and slashed costs, services firms bore the brunt with many cutting prices and others losing lucrative contracts.
"I think it's still going to be a pretty tough sector," said one fund manager who asked not to be named, and who expects companies will be continuing to look at opportunities to make savings.
There has been a spate of profit warnings from mining and resource contractors this year including Transfield Services Ltd and WorleyParsons Ltd.
Still, the BIS Industries float comes amid a flurry of IPOs in Australia, building up confidence in new listings following a moribund period in the market.
Other listings expected by the end of the year include broadcaster Nine Entertainment Co Pty Ltd , which is hoping to raise A$658 million, and property investment manager GDI Property Group, which is seeking to raise A$568 million.
On Thursday education training provider Vocation Limited brought forward the bookbuild for its A$230.5 million to A$253.5 million raising, setting the price at the top end of the range, a person familiar with the matter said.
"How the market prices Bis Industries is going to be: either the investors understand the tough industry it is in, or whether it's been carried away by a momentum that we are getting in the current (IPO) market," another fund manager, who declined to be named, told Reuters.
Bank of America Merrill Lynch, Goldman Sachs and UBS are the joint lead managers on the Bis Industries initial public offering, one person said. KKR, Bank of America Merrill Lynch, and UBS could not be reached immediately for comment.
Representatives for Bis and Goldman Sachs declined to comment.
The sources declined to be named because the process is confidential.