Babylon Pump & Power (ASX:BPP) entered into a binding agreement to acquire Matrix Hydro Services for an upfront acquisition consideration of AU$2.5 million, according to a Wednesday Australian bourse filing.

Matrix is a Western Australia-based specialist provider of aquifer testing and groundwater management services. Matrix co-founders Blair McDiarmid and Michael Townley will join Babylon's management team.

The consideration consists of AU$2 million in cash and AU$500,000 in fully-paid ordinary Babylon shares.

The deal is subject to several conditions precedent, including Babylon completing its due diligence concerning Matrix.

Babylon will also undertake an accelerated non-renounceable entitlement offer to raise a total of AU$3.5 million at an issue price of AU$0.004 per share.

Its largest shareholder, Belgravia Strategic Equities, as well as other entities controlled by Geoff Lord, along with major shareholder Resource Water Group, indicated their intentions to take up their entitlements in full. The institutional entitlement offer is expected to raise a total of AU$1.1 million.