Two Houston-area companies get taken over

The number of Houston-area public companies fell by two today as APA completed its acquisition of Callon Petroleum while Kodiak Gas Services closed its deal to buy CSI Compressco. Both acquirers are also based in the Houston-area.



Background to the APA deal

APA (formerly known as Apache) announced its deal for Callon in early January.  The all-stock transaction valued the target at $4.5 billion. Callon is a Permian pure-play with 119,000 net acres in the Delaware Basin and 26,000 acres in the Midland Basin. That dovetails nicely with APA’s Permian basin assets. APA has 84,000 acres in the Delaware Basin and 197,000 in the Midland Basin. The company also has producing assets in Egypt and the North Sea.

APA estimates that they can save $55 million from eliminating duplicate general and administrative expenses and $55 million from operating efficiencies in the Permian.

Callon first had informal merger discussions back in November 2021 with an unidentified publicly-traded E&P operator and continued to have such discussions with various other parties throughout 2022 and 2023.

APA first came into the picture in September 2023 when it engaged financial advisors to review potential transactions. The first contact between the CEOs occurred in October. In the end, APA were competing with another unidentified publicly-traded E&P operator before APA sweetened its proposal on December 29.

SEC filing – 8-K – Completion of Callon acquisition

Background to the Kodiak deal

Kodiak’s $854 million all-stock transaction was announced just before Christmas. CSI was formed in 2000 and went public in 2008. Until January 2021, CSI was effectively controlled by Tetra Technologies, another Houston-area public company. Tetra sold its interest to Spartan Energy Partners, a PE-backed private company, for $30.7 million (plus the elimination of $622 million of net debt).

Ever since Spartan took over, they have been looking to do a deal that would reduce leverage and increase CSI’s scale. It held informal discussions with various parties from January 2021 until September 2023. Kodiak’s CEO initially contacted the CEO of CSI in May 2023 with a view to Kodiak merging into CSI as a pathway for Kodiak to go public.  Instead, Kodiak decided to perform a standalone IPO which it completed in July 2023.

Discussions between the parties paused while Kodiak went through its first quarter as a public company, but began again in September 2023. The deal wasn’t announced until December primarily because the advisors took awhile to figure out the most efficient structure to minimize the tax issues surrounding the CSI partnership.

SEC filing – 8-K – Completion of CSI acquisition

You can see the complete list of Houston-area public companies here.

 

 

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