$854m deal involving two Houston companies collapes

Sentinel Energy Services, a blank check company with its head office in downtown Houston, has called off its $854 million deal to buy Strike LLC, based in The Woodlands.

Sentinel is led by Chairman Andrew Gould (who was CEO of Schlumberger between 2003 and 2011) and CEO Krishna Shivram (former CFO and interim CEO of Weatherford). It completed its IPO in November 2017 and has been looking to make a deal since.

In October it agreed to buy Strike, a pipeline infrastructure services company that is backed by PE firm OEP Capital Advisors. Strike had revenues in 2018 of $1.3 billion and was projecting an adjusted EBITDA of $136 million. Sentinel agreed to buy Strike for $854 million enterprise value, at a multiple of 6.3x.

The funding for the transaction was relatively complicated. It involved using the IPO proceeds of $345 million and getting a $150 million PIPE deal (private investment in public equity) from Fidelity Investments and CSL Capital Management (the sponsors of Sentinel). The rest of the consideration came from the shareholders of Strike rolling over their equity.

The acquisition was called off  ‘in response to current market conditions’.

Sentinel is now under the gun to close a transaction by November 2019. As a blank check company it has up to 24 months after the IPO to complete an initial business combination. Otherwise it has to liquidate itself.

Strike has been owned by its PE firm since August 2013. That means the clocking is ticking for them too, though the urgency is not quite the same.

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