Tag Archives: M&A

Oilfield services spin-off back on

TechnipFMC has announced that its plan to split into two is back on. The company first announced the split in August 2019 but put it on hold in March 2020 at the height of the pandemic.

The company intends to spin off 50.1% of its Engineering and Construction arm into a new public company called Technip Energies. This will have its headquarters in Paris and be listed on Euronext Paris.



Bpifrance, a 5% shareholder currently, has agreed to invest $200 million in Technip Energies to buy part of TechnipFMC’s remaining 49.9% stake. The ownership stake acquired will depend on average price of the shares of Technip Energies in the first 30 days after spin-off

The remaining business, primarily the production business that was formerly part of FMC, will still be called TechnipFMC and be headquartered in Houston.

The company has disclosed that Technip Energies will be spun off with net cash of $2.7 billion. TechnipFMC will have $1.7 billion of net debt. The current market cap of the combined business is $5.25 billion.

Goodwill impairment

FMC Technologies and Technip announced plans to merge in May 2016 and completed the merger in 2017. The total purchase price was $8.2 billion, including $5.2 billion of goodwill. Since the acquisition, the company has written off $3.4 billion of goodwill, though not all of that relates to the merger

Integration costs

The company spent $262 million on integration costs between 2016 and 2019. Since the separation was announced, the company has spent a further $99 million through September 2020 on separation costs. Impressively, in 2019, the company managed to spend $31 million on merger costs and $72 million on separation costs!

The company expects the separation to be completed in the first quarter.

https://investors.technipfmc.com/news-releases/news-release-details/technipfmc-announces-resumption-activities-toward-separation-two#

Blank check company completes acquisition of online gaming business

Landcadia Holdings II, a blank check company launched by Tilman Fertitta, has completed its acquisition of Golden Nugget Online Gaming (GNOG). The transaction was originally announced in June 2020.

Landcadia II went public in May 2019. GNOG was a subsidiary of Landry’s the restaurant and casino business owned by Mr. Fertitta.



Currently GNOG is involved in online casino gaming in New Jersey, where it has a 13% market share. It is planning to expand into Pennsylvania, Illinois, Michigan and West Virginia, where online betting is now legal. It is not planning to enter the sports betting market, where DraftKings is dominant. GNOG may be precluded from betting on NBA games as Mr. Fertitta also owns the Houston Rockets.

For the nine months ending September 2020, GNOG had revenues of $68 million and operating income of $22.5 million. Revenues and operating income are up about 75% on the comparative period.

Consideration

Landcadia II is paying $542 million for GNOG., This includes $314 million in equity, $30 million in cash and $150 million repayment of debt owed by GNOG. There is also $48 million of consideration in the form of debt repayment fees and a tax receivable agreement. GNOG is also taking on $300 million of debt which was used to fund a capital distribution to an affiliate of Mr. Fertitta.

Mr. Fertitta owns 11.3% of the equity post-close. However, due to the dual class structure, he owns 79.9% of the voting rights. Jefferies, the financial partner of Mr. Fertitta, received a $11.1 million underwriting fee as a result of the transaction. It will also receive fees of $3.75 million for being the exclusive financial and capital markets advisor.

Management

Mr. Fertitta will serve as the Chairman and CEO of GNOG. Thomas Winter will be the President. He joined Landry’s in 2013 as the General Manager of the online gaming division He has a lot of experience in online gaming gained in Europe.

Michael Harwell will be the CFO, subject to gaining regulatory approval from the New Jersey Division of Gaming Enforcement. He was the Chief Accounting Officer of Independence Contract Drilling until May 2020.  However, he worked for Landry’s for seven years prior to that.

Landcadia III

Landcadia Holdings III, the third blank check company launched by Mr. Fertitta and Jefferies, went public in October.

SEC filing – Golden Nugget Online Gaming

 

 

 

Small E&P company agrees to reverse takeover

Camber Energy has agreed to buy 51% of Viking Energy for $20 million. Both E&P companies are based in Houston, with Camber traded on the NYSE and Viking traded over-the-counter. The deal is effectively a reverse takeover as it’s the Viking management who will be running the show post-close.



Camber Energy used to be called Lucas Energy and went public in 2006. It’s had a troubled past. The strangest event was in October 2011 when the then-CEO made an acquisition for $22 million without telling the Board or making it public. The issue only came to light a year later when the seller sued for payment that was due in November 2012.

Camber has effectively been a shell since selling its main operating assets in 2019. In June 2019, it announced a reverse takeover by Lineal Holdings, an oilfield construction company. The deal closed but had to be unwound on December 31, 2019 as it did not meet NYSE listing requirements

Viking deal

The Viking deal was originally announced in January 2020, though in a different form. In the original version, Camber would have issued shares to Viking shareholders so that the latter would own 85% of the combined group post-closing.

Instead the revised deal calls for Camber to pay $20 million in cash. This is financed by $9.2 million cancellation of debt owed to Camber by Viking. Camber had lent money to Viking earlier in 2020 to enable Viking to close on an acquisition of 123 wells in Texas and Louisiana.

The remaining $10.8 million was paid in cash and funded by a new loan from Camber’s preferred shareholder.

James Doris, the CEO of Viking, has been appointed the CEO of Camber. Frank Barker, the CFO of Viking, becomes the CFO of Camber. Louis Schott, former interim CEO and Robert Schleizer, the former CFO of Camber, have stepped down. Each was paid a bonus of $150,000.

Fake CFO

Viking Energy was the subject of my most bizarre post I’ve written in this blog.  In September 2019, the SEC announced fraud charges against a former CEO for creating a fake CFO.

SEC filing – Camber Energy Viking acquisition

Houston oilfield telecoms company to be acquired

Rignet, based in west Houston, has agreed to be acquired by Viasat, in an all-stock transaction that values Rignet at $222 million enterprise value.



Rignet originally provided remote communication networks for the offshore sector. More recently the company has been diversifying into mission-critical IoT (Internet of Things) applications and systems integrations for energy telecom projects.

The company has revenues of $225 million. However it also has debt of over $100 million that primarily expires in 2022. Rignet went public via an IPO in 2010. Its largest shareholder is a Kolhberg Kravis Roberts, who own 25%.

Viasat is based in Carlsbad, California and is a leader in satellite-based networking products and services to the consumer, enterprise and government. It has revenues of $2.3 billion and a market capitalization of over $2 billion.

The existing management team of Rignet will operate the business from the Houston headquarters.

The companies expect the deal to close in mid-2021.

SEC filing – Rignet takeover

Publicly-traded MLP to be acquired by effective parent

Houston-based TC Pipelines, LP is to be acquired by TC Energy which controls the General Partner that manages TCP. TC Energy also owns 24% of the common units of master limited partnership.



This is part of a trend in recent years where MLPs have been taken back in-house. Once owners and investors realized that MLPs were not really like a risk-free utility, the cost of capital rose and the attractions of being publicly-traded faded.

The deal values TCP at $1.68 billion or $31 per common unit. The 52-week high was $41. Once again, minority unit holders will feel aggrieved that the controlling owner has chosen to act when the stock price has been depressed. However, the offer price does represent a rise from the $27.31 that TC Energy originally proposed back in October.

TCP was formed by TransCanada in 1998 and went public the following year in a $275 million Initial Public Offering.  The company has interests in 6,300 miles of natural gas pipelines, mainly in the Great Lakes region and the Pacific Northwest.

The deal is expected to close around the end of the first quarter of 2021.

https://www.tcpipelineslp.com/announcements/2020-12-15-tc-pipelines-lp-announces-definitive-agreement-for-tc-energy-to-acquire-all-its-outstanding-common-units/

Houston ATM company receives buy-out offer

[UPDATE 15 Dec 2020 – Cardtronics has now agreed to a buy-out offer of $35 per share from the two PE firms].

Cardtronics has received a buy-out offer from two private equity firms. Apollo Global Management and Hudson Executive Capital have jointly offered to buy the stock for $31 per share.



Cardtronics is the world’s largest ATM operator with 285,000 ATMs in 10 countries. It has its head office in the Westchase area of Houston. The company owns about a quarter of the ATMs. For the rest, Cardtronics manages the ATMs for customers such as Walgreens and CVS. Approximately half of its $1.2 billion of revenues comes from the company charging end users a surcharge fee for using its company-owned ATMs.

At the height of the pandemic in March, ATM withdrawals in the US fell about 30% year-on-year. By Q3, volumes were flat year-on-year. The company also has a presence in the UK, where Q3 ATM withdrawals were still 33% down on a year earlier. As a result, the stock price hit a low of $16 in March, having been $47 in January 2020.

After the offer was announced, the share price rose 32% to $34.11. This gives the company a market capitalization of $1.15 billion.

Douglas Braunstein, a non-executive director since June 2018, is the Founder & Managing Partner of Hudson Executive Capital LP. It owns 19.4% of the stock of Cardtronics.

Mr. Braunstein has recused himself from any discussions that the Cardtronics Board of Directors has had regarding any transaction. The other members of the Board of Directors will review and assess the terms of the proposal.

Cardtronics has retained Goldman Sachs & Co. LLC as its financial advisor and Weil, Gotshal & Manges LLP and Ashurst LLP as its legal advisors

https://ir.cardtronics.com/news-releases/news-release-details/cardtronics-confirms-receipt-proposal-apollo-global-management

 

Houston company to move to Fort Worth after acquisition

Contango Oil & Gas, based in Houston, has agreed to acquire Mid-Con Energy Partners, based in Tulsa for $43 million. After the deal closes, the headquarters of the combined company will move to Fort Worth.

The biggest shareholder in both companies is Goff Capital, based in Fort Worth.



Contango’s operations are mostly in Central Oklahoma and the nearby Western Anadarko Basin. Mid-Con’s assets are also primarily in Central Oklahoma. In fact, in June, Contango signed a management services agreement with Mid-Con to provide operational services as the operator of record on Mid-Con’s properties.

In an all-stock transaction, Contango is issuing shares worth $42.8 million to the unit holders of Mid-Con, a 5% premium. After the deal closes in late 2020 or early 2021, Contango shareholders will own 87% of the combined company.

John Goff and affiliated parties own 28% of Contango. The CEO of Contango, Wilkie Colyer, is also based in Fort Worth. Mr Goff acquired his stake in 2018 and installed Mr Colyer as the CEO shortly thereafter. Mr Wilkie was a non-executive director of Mid-Con until he resigned in June 2020.

That resignation was part of a recapitalization of Mid-Con. Mr Goff ended up owning 56% of it. He also appointed his son, Travis, to the Board.

The deal follows a recent spate of all-stock transactions in the E&P sector

  • ConocoPhillips, based in Houston, agrees to acquire Concho Resources (Midland) for $9.7 billion.
  • Pioneer Natural Resources (Dallas) buys Parsley Energy (Austin) for $7.6 billion. (Dad Scott Sheffield is the CEO of Pioneer, son Bryan is the founder and chairman of Parsley).
  • Devin Energy (Oklahoma City) agrees to buy WPX Energy (Tulsa) for $2.6 billion.

SEC filing – Contango – Mid-Con

Noble Energy delisted after acquisition by Chevron

Chevron has completed its all-stock acquisition of Noble Energy, whose shares have now been delisted from the NYSE. The stock was acquired for $5 billion. Including debt, the enterprise value of the transaction was $13 billion.



Noble’s primary assets are in the Eastern Mediterranean sea (Israel and Cyprus).  These will fit well with Chevron’s assets in Egypt. Noble also has 92,000 contiguous net acres in the Permian which are next to Chevron’s acreage. Noble also has 336,000 of net acres in the DJ Basin in Colorado. This would be a new onshore basin for Chevron.

Board sought to reduce debt in 2019

The deal was first announced in July 2020. Chevron also acquired Noble’s 63% stake in publicly-traded Noble Midstream Partners.

In July 2019. the Board of Noble decided to explore a sale of its interest in Noble Midstream in order to reduce leverage and explore potential transactions to reduce the company’s concentration risk in the Eastern Mediterranean.

In the fall of 2019, the company received offers from a strategic midstream operator and a private-equity-backed entity to purchase Noble Midstream. However, both offers were not acceptable.

At an industry event in October 2019, Kevin Haggard, Noble’s Treasurer met Frank Mount, General Manager of M&A for Chevron. Mr Mount requested a meeting with Noble regarding the Mediterranean assets. Discussions moved slowly over the next few months.

Pandemic spurred sale of company

After the pandemic hit, the Noble Board hired J.P Morgan to review strategic alternatives and the discussions with Chevron morphed into an outright purchase. Noble contacted 9 other E&P operators to see if they were interested in acquiring the company. Nobody was interested in getting into a bidding war, either for strategic reasons or because of Noble’s high debt levels.

Golden Parachutes

Under the terms of the merger agreement, David Stover, the CEO of Noble is in line to receive $25.2 million in severance and vested equity. COO Brent Smolik will get $14.1 million, while CFO Ken Fisher will get $8.6 million. These payments will be triggered if their employment is terminated within two years following a change in control.

In connection with the merger, Mr Smolil has resigned as CEO of Noble Midstream, He will be replaced by COO Robin Fielder. She joined the company in January 2020, having previously worked at Anadarko.

I’ve deleted Noble Energy from the list of Houston-area public companies, but added Academy Sports + Outdoors, following its IPO launch last week. Oasis Petroleum, which filed for bankruptcy last week, is scheduled to be delisted next week. You can see the complete list here

 

SEC filing – Chevron completes Noble acquisition

KLX Energy Services and Quintana complete merger

Photo by Joshua Doubek

The merger between two publicly-traded oilfield service companies, Quintana Energy Services (QES) and KLX Energy Services (KLXE), has been completed. The all-stock deal was first announced in May 2020.

KLXE is based in Florida while QES’s head office is in downtown Houston. KLXE is a leading provider of completion, intervention and production services. QES’s primary services include directional drilling, snubbing, coiled tubing, wireline services and pressure pumping.



The merger allows the companies to rationalize their fleets of coiled tubing and wireline assets. Before the merger was announced, QES had decided to repurpose its recently-idled pressure pumping units to support its coiled tubing fleet. The merger helps that objective.

The combined company takes the KLX Energy name and keeps the KLXE ticker symbol. However, the head office will remain in Houston.

Consideration

The combined company had proforma revenues for the three months ended April 30, 2020 of $176 million and an operating loss before impairment of $36.5 million. KLXE shareholders got 59% of the combined company, QES 41%. The preliminary valuation of the QES equity at March 31 was $46.9 million, considerably below its net asset value of $112.9 million.

According to the merger proxy statement, QES has long held the view that consolidation in the oilfield services sector was necessary. They identified KLXE as a possible merger partner in the fall of 2019. At that time QES was in discussions to acquire another unnamed company. They first approached KLXE in March 2020.

Management of combined company

Interestingly, QES initially suggested that then-CEO of KLXE, Amin Khoury and Thomas McCaffrey, then CFO of KLXE take the same roles in the combined company for one year. After that, QES CEO Chris Baker and QES CFO Keefer Lehner would take the top jobs.  Unfortunately, Mr Khoury had to resign suddenly in April for personal family health reasons. Mr McCaffrey was appointed CEO of KLXE.

As a result, Mr Baker immediately became the CEO of the combined group and Mr Lehner the CFO. To alleviate possible concerns of the KLXE shareholders Mr McCaffrey has been appointed to the combined Board and will chair the integration committee.

The company expects to generate $40 million in synergies. This will primarily be achieved by  rationalizing the Florida corporate office and the combining the KLXE and QES Houston-area locations. There’s also some overlap of field offices.

 

NRG to buy Houston-based Direct Energy

NRG has agreed to buy Houston-based Direct Energy from Centrica for $3.6 billion in cash. The company expects to save $300 million in synergies, much of it from the elimination of duplicate headquarters and back office functions.

NRG is an integrated power company that has its head office in New Jersey. It has an operational head office in Houston as most of its retail revenues are in Texas. Its generating capacity is split more evenly between Texas, New York, Connecticut, Illinois and California.



Direct Energy was acquired by UK-based Centrica in 2000 for $912 million. At that time, Centrica (formerly a nationalized company called British Gas) was looking to grow internationally. Through Direct Energy, it subsequently acquired Clockwork, a home services franchise platform that operated brands such as One Hour Heating & Air Conditioning, Benjamin Franklin Plumbing and Mister Sparky Electric.

In recent years, Centrica has been losing market share in its home market. This forced it to retreat from its international operations. It sold Clockwork last year for $300 million.

When Direct Energy was acquired, its head office was in Toronto, Ontario.  The head office moved to Houston in 2012. It is one of the largest retail providers of electricity, with customers in all 50 states. The acquisition allows NRG to diversify its retail customer base.

NRG expects to achieve $300 million in synergies by 2023 while spending $220 million in one-off costs to do that. It doesn’t quantify how it gets to the $300 million but does state that there will be ‘facility savings with significant employee geographic overlap, co-loaded headquarters and branch offfices’.

The transaction is expected to close by the year end.

https://investors.nrg.com/events/event-details/business-update-call