Tag Archives: M&A

Patterson-UTI to acquire smaller rival for $295 million

Allan D. Hasty

Patterson-UTI Energy, a drilling rig contractor based in NW Houston, has agreed to acquire smaller rival, Pioneer Energy Services, based in San Antonio for $295 million. This includes the retirement of all the $200 million debt of Pioneer. $30 million will be paid in cash, the rest in stock.



Pioneer exited bankruptcy in May 2020, having converted $267 million of debt into equity.  Loomis, Sayles & Co, an investment management firm, ended up owning 44% of Pioneer. BlackRock owns 20% of Pioneer (and 15% of Patterson-UTI).

Patterson-UTI is buying 17 rigs in the USA and 8 that operate in Columbia. 16 of those rigs are super-spec rigs, adding to the 150 that Patterson-UTI already has. This will give Patterson a market share of around 30% for super-spec rigs, behind market leader, Helmerich & Payne (around 37%).

Pioneer’s drilling rigs account for about 60% of its revenue ($34 million out of $59 million for the 1st quarter of 2021). The rest of Pioneer’s revenue in the quarter came from Well Servicing ($14 million) and Wireline Services ($10 million).  Patterson has said it will divest of the Well Servicing business after the deal closes, expected in the 4th quarter of 2021.

https://patenergy.com/investors/news/press-release-details/2021/Patterson-UTI-Energy-Announces-Agreement-to-Acquire-Pioneer-Energy-Services/default.aspx

 

Luby’s sells most of its operations

SBG San Antonio

Luby’s has announced that it will sell most of its operations in two separate transactions. The company has been struggling for years and, in November 2020, it agreed to liquidate its assets and dissolve the company.



Prior to the decision to liquidate, the company had 61 Luby’s branded restaurants (mostly in Texas), 24 Fuddruckers restaurants that were owned and 71 that were franchised. However, a number of the Luby’s had closed due to the pandemic.

The company also operates culinary contract services that offered on-site food services for healthcare facilities, colleges and sports stadiums. It also made sales through retail grocery outlets.

32 of the Luby’s restaurants and the brand name will be sold to a newly-formed affiliate of Calvin Gin. Approximately 1,000 workers at those restaurants will be offered positions by the buyer. Mr. Gin is part of the family that established the Flying Food Group, the third largest airline catering company in North America. The business also provides food preparation services for Starbucks.

The buyer is not paying paying any cash for the business but assuming operating liabilities and giving Luby’s a loan note. Luby’s anticipates the total value to be $28.7 million. The real estate for 25 of the 32 locations is owned by Luby’s. This is not part of the transaction and will be auctioned off by the company separately.

The Fuddruckers franchise is being sold to Nicholas Perkins, a Washington, DC-based entrepreneur for an estimated $18.5 million. Again, the payment is in the form of assumed operating liabilities and a loan note. Mr. Perkins previously acquired most of the company-owned Fuddruckers restaurants.

Once these transactions are completed, Luby’s will be left with a handful of company-owned Fuddruckers, the culinary contract service business and the retail sales.

However the main value will be derived from the sale of real estate which comprise most of the liquidation net asset value of $117 million. The company currently has 63 properties in total. The share price is $3.85, giving it a market capitalization equal to its liquidation value.

SEC filing – Luby’s sale

SEC filing – Fuddruckers sale

E&P company to be based in Houston after $5.7 billion merger

Independence Energy and Contango Oil and Gas have agreed to merge in all-stock transaction with an enterprise value of $5.7 billion.



Independence is an E&P business built and managed by KKR, a global investment firm. It consists of upstream oil and gas assets in North America, including those in the Permian, Eagle Ford, Rockies, Denver Julesburg and Barnett basins, as well as mineral and royalty interests and midstream infrastructure.

Contango operates in the Permian, Mid-Continent and Rockies areas. In October 2020, it moved its head office from Houston to Fort Worth, following its merger with Mid-Conn. Contango has made four acquisitions in the past 18 months and has a similar philosophy to KKR’s Energy Real assets team.

The Independence shareholders will own 76% of the combined business, Contango shareholders will own 24%. The combined business will be based in Houston with a new name.

The KKR Energy Real assets team will run the business, led by David Rockecharlie (CEO) and Brandi Kendall (CFO). They will remain employees of KKR. John Goff, the chairman of Contango, will be the chairman of the combined group.

The business is being positioned to be a leading consolidator in the US E&P sector and it will be KKR’s primary platform for pursuing upstream oil and gas opportunities. Unusually, the combined business, even as a public company, will be paying KKR a management fee of $53.3 million per annum plus 1.5% per annum of the net proceeds from all future issuances of equity securities.

The transaction is expected to close late in the 3rd quarter or early in the 4th quarter.

SEC filing – KKR Energy and Contango merger

 

Houston E&P company to merge with rival in $17 billion transaction

Cabot Oil and Gas, based in west Houston, has agreed to merge with Cimarex, based in Denver, in an all-stock transaction. The combined business will have an enterprise value of $17 billion. Cabot shareholders will own 49.5%, Cimarex 50.5% of the combined company.



Cabot has its operating assets in the Marcellus basin in NE USA, while Cimarex operates in Permian and Mid-Continent basins.

The combined company will be based in Houston with a new (as yet undetermined) name. Back office functions of Cimarex in Tulsa and Denver will be relocated to Houston.

Cimarex CEO Thomas Jorden will be the CEO of the combined company and will relocate to Houston. Dan Dingles, CEO of Cabot, will be the Executive Chairman until no later than December 2022. Cabot CFO Scott Schroeder will be the CFO of the combined group.

The Cabot management team have some rich change-of-control provisions. According to the most recent proxy statement CEO Dingles would be eligible for a payout of $40.6 million. Under the new employment agreement that Mr. Dingles has signed, he will be eligible for this payout when he steps down as Chairman.

Schroeder, the CFO who is staying on, has a change-of control package worth $19.3 million. Mark Burford, the CFO of Cimarex, has a change-of control package worth $7.9 million.

The companies are targeting $100 million of estimated annual G&A cost synergies. The markets have reacted badly to the proposed deal as there is no operational field overlap with Cabot primarily producing gas and Cimarex oil. The stock of both companies down more than 5% each.

The deal is expected to close in the fourth quarter.

SEC filing – Cabot – Cimarex merger

 

Houston medical devices company to be acquired for $550 million

Allergan Aesthetics, a subsidiary of AbbVie, agrees to acquire Houston-based Soliton for $22.50 per share, in cash. This values Soliton at $550 million enterprise value.



Soliton is based in the Galleria area and went public in February 2019 at $5 per share. The company uses technology licensed from MD Anderson. The product uses rapid pulses of designed acoustic shockwaves to disrupt cellular structures in skin tissue. It doesn’t have any revenues yet, however it announced its first commercial launch earlier this month.

It believes the product could be used in tattoo removal, cellulite treatment and fibrotic scar treatment. Each device will use disposable cartridges to be used in different treatment devices, equivalent to selling a razor and blades. It gained FDA approval in May 2019 for tattoo removal.

Remeditex Ventures, which owns 43% of the stock of Soliton, has agreed to vote in favor of the deal.

In November 2020, the company appointed Brad Hauser as its new CFO, replacing Dr. Chris Capelli, who became Chief Science Officer. Mr. Hauser joined from  Allergan Aesthetics where he was the General Manager for CoolSculpting, a technology that reduces fat by non-surgical methods.

SEC filing – Soliton takeover

 

Houston real estate company to be taken over in $5.9 billion transaction

Courtesy JLL

Weingarten Realty Investors, a Houston-based real estate investment trust (REIT) has agreed to be acquired by Kimco Realty Corporation, based in New York in a transaction valued at $5.9 billion.



KImco is the number two in shopping center REITs while Weingarten is number five. Weingarten primarily operates in Texas, Florida and California. It has 159 properties where it develops and leases space in centers anchored by tenants such as Kroger and TJ Maxx.

Weingarten history

Harris Weingarten, an immigrant from Poland, first came to America in the 1880s. He started a general store in the Richmond/Rosenberg area, southwest of Houston. To grow the business, he moved to Houston in 1895 and opened his first grocery store in 1901. His son founded the real estate company in 1948 to build supermarkets for his father’s business. The grocery business grew to 103 stores before being sold to Grand Union in 1980 while the real estate business went public in 1985. Harris’ grandson, Stanford Alexander, 92, is Chairman Emeritus while great-grandson, Andrew is the Chairman and CEO.

Severance and synergies

Kimco shareholders will own approximately 71% of the combined company. The company will keep the Kimco name and its headquarters in New York. The press release stated that the business would be run by Kimco senior management. It made no mention of the Weingarten executive team.

According to the recently-filed proxy, Andrew Alexander will get approx $17 million (including vested equity) if he leaves as a result of a change in control. COO Johnny Hendrix will get about $8 million, CFO Stephen Richter over $9 million. The two Alexanders still own 6% of the equity. That means the stake is worth about $200 million.

Kimco expects to make annual savings of $35-$38 million from the combination, which it  expects to close in the second half of 2021.

SEC filing – Weingarten takeover

 

Cadence Bank to merge with BancorpSouth in all-stock deal

Cadence Bancorporation, based in Houston, has agreed to an all-stock merger with BancorpSouth, based in Tupelo, Mississippi. The combined business will have a market capitalization of $6 billion.



The two banks are quite complementary is that Bancorp is a community bank, while Cadence brings commercial banking expertise. Bancorp has 325 full-service branch locations in Alabama, Arkansas, the Florida Panhandle, Louisiana, Mississippi, Missouri, Tennessee and Texas. Cadence has 98 branches in Alabama, Florida (around Tampa), Georgia (where Bancorp South has no presence), Mississippi, Tennessee, and Texas.

The two banks have contrasting histories. Bancorp was founded in 1876 in Verona, Mississippi and moved to Tupelo ten years later.  In contrast, Cadence was only formed in 2009 by banking industry veterans who helped grow Amegy Bank before it was sold to Zions Bancorporation in 2005.

The shareholders of Bancorp will get 55% of the combined equity, Cadence 45%. The company will keep the Cadence name. It will have its corporate headquarters in Houston, but its banking headquarters in Tupelo.

Dan Rollins, the CEO of Bancorp will become the Chairman and CEO, while Paul Murphy, CEO of Cadence will become Executive Vice Chairman. Mr. Rollins, before becoming CEO of Bancorp in 2012, spent 18 years in Houston as President and COO of Prosperity Bank.

Chis Bagley, COO of Bancorp will become President of the combined group. He’s also ex-Prosperity, having spent 17 years there. Valerie Toalson, the CFO of Cadence, will become the CFO of the combined group.

The deal is expected to close in the fourth quarter of 2021.

SEC filing – Cadence BanCorp merger

 

Houston SPAC to take space technology company public

Credit: Made in Space (a Redwire company)

Genesis Park, a Houston-based Special Purpose Acquisition Company (SPAC), has agreed to take Redwire, a space technology company, public.



Genesis Park went public in November 2020 in a $150 million IPO.

Redwire, is based in Jacksonville, FL and manufactures space-capable robotics, solar arrays and antennas, and other equipment used in space. It plans to manufacture and assemble components in-space using 3D printing. The company was formed in June 2020 from the merger of two companies, with backing from AE Industrial Partners. Since then, it has made five more acquisitions.

Redwire becomes the seventh space venture in the past year to announce a SPAC deal. It had revenues of $120 million in 2020 and is currently cash flow positive. By 2025, it expects to grow to $1.4 billion. The transaction values the company at $615 million enterprise value.

Its CEO, Peter Cannito, was previously the CEO of Polaris Alpha, a high-tech solutions provider that developed systems for the Department of Defense. He’s also spent 12 years working for PE-backed companies in the defense, technology and government services market.

Jonathan Baliff, the CFO of Genesis and former CFO at Bristow Group, will join the Board of Redwire as a non-executive director.

The deal is expected to close by June 2021.

Investor Presentation – Genesis Park Redwire

Noble Corporation acquires Pacific Drilling in all-stock transaction

Noble Drilling has agreed to acquire Pacific Drilling in all-stock transaction. Noble has its operational headquarters in Sugar Land while Pacific is based in west Houston.



The shareholders of Noble will own 75% of the combined company. It currently operates 19 drilling rigs, while Pacific operates 7. However, Noble said it plans to sell the Bora and Mistral rigs that are currently idle.

There’s little overlap in the customers or the territories between the companies. Pacific currently has three rigs running, one in the US Gulf of Mexico (for Murphy), one in West Africa and one in the Mexican side of the Gulf of Mexico (both for Petronas). Noble is not currently operating in the latter two territories.

Both companies have recently exited bankruptcy protection. Noble filed for Chapter 11 in July 2020. $3.4 billion of unsecured debt was exchanged for 86% of the newly reorganized company and the company exited in February 2021.

Pacific filed in November 2020 for the second time in three years. It emerged from bankruptcy on December 31, 2021. Bondholders exchanged $1.1 billion of debt for 91.5% of the equity in the new company.

Neither company has stock that is currently traded, so no value of the transaction was disclosed. I would expect Noble to re-list in the near future. Noble is forecasting at least $30 million of annual synergies. The combined company will be run from Sugar Land.

The transaction is expected to close in April 2021.

Investor Presentation – Noble acquires Pacific Drilling

Houston distributor to be acquired for $91 million

Houston Wire and Cable has agreed to be acquired by OmniCable, a subsidiary of Dot Holdings, which is a family office investment firm specializing in acquiring distribution companies. The price is $5.30 per share which values HWCC at $91 million. The price represents a premium of 39% over yesterday’s closing price.



Houston Wire is a distributor of electrical and mechanical wire and cable with revenues of $300 million. Approximately a third of its revenues come from the energy sector.  The company has its head office near the 610/I-10 interchange on the east side.

The company was founded in 1975. It went public in 1987. It was acquired two years later by ALLTEL Corporation. After the business was sold to a PE firm in 1997, the company went public for a second time in 2006.

For some time, the company has been laboring under high debt level of around $75 million of relatively low profitability levels.

The agreement with OmniCable includes a 30-day ‘go-shop’ period, which permits the Board of Directors and advisors to solicit alternative buyers. However, the company expects the deal to close in late May.

The current CFO is Eric Davis. He was appointed to that role in November 2020 after previous CFO Chris Micklas stepped down in June 2020.

SEC filing – HWCC sale