Exterran Corporation to be acquired for $735 million

Houston-based Exterran Corporation has agreed to be bought by Enerflex in an all-stock transaction that values the company at $735 million.

The contract combines two businesses that are primarily involved in natural gas processing and compression services, including manufacturing, service and contract operations.

Enerflex shareholders will own approximately 73% of the combined business which will continue to be run from Calgary by the Enerflex management team.

The predecessor business to Exterran was formed in 1954 as South Coast Gas Company and later operated as Hanover Compressor Company and Universal Compression. In 2007, these two businesses merged to form Exterran Holdings. In 2015, the manufacturing and international compression businesses were spun off. The spin off was named Exterran Corporation, while the US compression business was renamed Archrock.

At the time of the spin-off, Exterran shares traded at $18. Before the takeover announcement, the stock was trading at $3. The company has struggled in recent years as E&P operators cut back on capital expenditures and the company was burdened with $525 million of debt at spin-off.

Enerflex expects to achieve $40 million of annualized savings. $35 million will come from restructuring the management and corporate support teams.

Assuming the Exterran management leave after the deal closes (expected in Q2 or Q3 this year) they will receive large payouts. CEO Andrew Way is in line for a cash severance of $6.1 million (3x base plus 3x  target bonus). Accelerated vesting of options will be worth another $3.3 million.

CFO David Barta will receive $1.9 million in cash severance (2x base plus 2x target bonus). His options will be worth $0.7 million.


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