Tag Archives: M&A

Houston SPAC to take biofuels refinery company public

Port Westward, Oregon

Industrial Tech Acquisitions II, a Houston SPAC, has agreed to take NEXT Renewables Fuels public in a transaction worth $530 million. NEXT, founded in 2016, is also based in Houston. Upon closing, the business will be renamed NXTClean Fuels.

NXT is in the process of developing a 50,000 barrel-per-day refinery in Port Westward, Oregon that will produce renewable diesel (‘RD’) and sustainable aviation fuel (‘SAF’).

Renewable Diesel

Renewable diesel is made from feedstock products such as vegetable oils, animal fats, used cooking oil and distillers corn oil. It uses the same source oils and fats as biodiesel. However, the refining process is different from biodiesel. The process is more capital-intensive, but RD is chemically equivalent to petroleum diesel and can be transported in petroleum pipelines.

Likewise, the refining process to make SAF is similar to regular jet fuel, except for the source feedstocks.

Construction of refinery

NXT expects the permitting of the Port Westward refinery to be granted by late 2023 with initial operations starting in mid-2026. The construction cost is currently $2.7 billion. (NXT’s own website shows a start date of 2024 and a construction cost of $2 billion, though this date and cost appear to be from June 2021).

The company aims to select an EPC (Engineering, Procurement and Construction) Contractor by the end of the year. Fluor is the frontrunner, as they have performed the engineering work so far for the company.

Supply and Offtake Agreements

NXT has an agreement with BP, who will supply 100% of the feedstocks for at least 5 years. It also has offtake agreements with Shell and Chevron. United Airlines, through its venture arm, has invested an initial $2.5 million in NXT. This investment could rise to $37.5 million, assuming certain milestones are met.

Forecast revenues

In its first full year of operation in 2027, the company is projecting revenues of $3 billion and EBITDA of $1 billion.  Half of the revenue will be generated from the sale of credits that arise from the Renewable Fuel Standard, enacted by Congress in 2005.

In the transaction, NXT will have an enterprise value of $530 million. It will also have $156 million of cash on its balance sheet.

Management

The CEO of NXT is Christopher Efird, an entrepreneur and investor who has led, or co-led the investment into 29 growth stage businesses. Many of those later went public.

David Kane, based in Las Vegas, currently serves as the CFO of NXT, though his title is Senior VP and Controller.  He has been the CFO at a number of small and medium sized companies in California and Nevada.

2nd SPAC run by Scott Crist

Industrial Tech Acquisitions II went public in January 2022. It raised $173 million and is the 2nd SPAC run by Scott Crist. The first SPAC took Arbe Robotics public in October 2021. Arbe is an Israeli company developing 4D automotive imaging radar. Arbe’s shares are trading at $4.00, compared to $8 when it went public.

SEC filing – Investor Presentation

BP to acquire renewable gas company for $4.1 billion

BP has agreed to acquire Houston-based Archaea Energy for $26 per share in an all-cash deal that values Archaea at $4.1 billion, including $800 million of debt. The deal values the company at 20 times the expected 2023 EBITDA.



Archaea develops, constructs and maintains renewable natural gas facilities (RNG) that capture waste emissions from landfills and converts them into low-grade fuels and electricity. It currently has 13 of them. The company also has 33 landfill gas to electric facilities, some of which were added after a recent acquisition.

The company is based in the Galleria area and was taken public in September 2021 by a SPAC based in Pennsylvania, Rice Acquisition Corp.  The SPAC actually acquired Archaea LLC for $347 million and Aria Energy LLC for $680 million, with the combined business being renamed Archaea Energy. So, its a tremendous return for its investors.

It is not surprising that they have been acquired by a traditional oil and gas company. Due to high oil prices, they are generating lots of cash, but are under tremendous pressure to invest in anything but traditional oil and gas.

The company appointed Brian McCarthy as its new (old) CFO in August 2022.

The deal is expected to close by the end of 2022.

SEC filing – Archaea – BP

Foxo Technologies goes public via Houston SPAC

Delwinds Insurance, a Houston SPAC, has completed its business combination with Foxo Technologies. As a result, the company has been renamed and is now based in Minneapolis.

Foxo is developing proprietary saliva-based epigenetic biomarkers with a plan to create simper, smoother, non-invasive underwriting of life insurance. Currently, underwriting involves lengthy timelines and invasive blood and urine specimen requirements.



Epigenetic biomarkers are chemical modifications, called DNA methylation that alter gene expression from external stimuli such as lifestyle and environment. The company plans to use automated machine learning to identify patterns of epigenetic biomarkers that correlate to health and wellness (e.g tobacco use, hypertension, alcohol abuse etc).

Foxo started in 2019.  The company is projecting its first revenues in 2023 with positive EBITDA during the following year. The transaction values Foxo at $300 million and leaves it with $194 million in cash to fund its growth.

Delwinds went public in December 2020 in a $200 million Initial Public Offering.  It planned to target businesses in insurance technology so the deal for Foxo (announced in February 2022) definitely met that criteria. Delwinds had 18 months from its IPO to complete a deal, otherwise it would be wound up and the cash returned to investors. In May, it received a 3-month extension to Sept 15.

SEC filing – Foxo completes Delwinds deal

Nauticus Robotics closes SPAC deal to go public

Nauticus Robotics, a Houston-based marine robotics company, is now a public company. Back in December 2021, it agreed a deal with CleanTech Acquisition Corp, a SPAC (Special Purpose Acquisition Corporation). The deal valued Nauticus at $377 million enterprise value.



The company used to be called Houston Mechatronics. It was founded in 2014 by Nicholaus Radford, who previously worked at NASA and Oceaneering. The company has its head office in Webster, two miles from the NASA Johnson Space Center and employs about 25 former NASA robot engineers.

Currently, manned service vessels are used to service the offshore energy sectors. Nauticus is developing tetherless, autonomous electric-powered robots that can be controlled by staff onshore. The company plans to rent out its Aquanaut robot for around $40,000 a day, less than half the cost of a deepwater rig.

Pre-production units are projected to be deployed in later this year. The company recently sold its first unit to IKM Subsea in Norway.

Investors in the business included Schlumberger (who now own 20%) and Transocean (19%).

Mr. Radford is the CEO. Rangan Padmanabhan was appointed CFO in May 2022. He spent many years at Solaris Asset Management and is a graduate of Rice University.

The company will trade on the NASDAQ under the ticker ‘KITT’.

SEC filing – 8-K

Shell to acquire rest of Shell Midstream in $1.9 billion transaction

Shell has agreed to acquire all of the common units of Shell Midstream Partners it did not already own for $15.85 a unit, in cash. The transaction is worth $1.9 billion. Shell currently owns 68.5% of the common units.

Back in February, Shell had offered $12.89 for each common unit in a zero-premium bid.

Many years ago, Master Limited Partnerships were in vogue and it was the fashion for E&P companies to spin off their midstream assets into publicly-traded MLPs. Shell were fashionably late in that they only spun off Shell Midstream for $23 per unit in October 2014, right before the crude oil price crash.

That crash laid bare the claim that MLPs had low risks and therefore low cost of capital. In addition, the tax rules changed in 2018 reducing the benefits of MLPs. Most publicly-traded MLPs have already been taken private by their sponsor. Why pay a dividend of 8% on a MLP when you can bring it inhouse by borrowing at 5%?

The transaction has been approved by the Conflicts Committee but most minority investors remain unhappy as they believe that the deal undervalues the company, particularly as some of the midstream assets were damaged by Hurricane Ida in 2021.

The transaction is expected to close in the fourth quarter of 2022.

SEC filing – Shell to acquire Shell Midstream Partners

Sharps Compliance to be taken private for $170 million

Sharps Compliance, a waste management company is to be taken private by Aurora Capital Partners. The PE firm offered $8.75 per share, which valued the company at $170 million.

[UPDATE 8-26 The deal is now compete]

The company handles medical, pharmaceutical and hazardous waste for small to mid-size companies such as pharmacies, dentist offices and nursing homes. The company went public in 2009 and has its head office is just south of NRG Stadium.

It grew rapidly during the pandemic, but revenues has since flattened out. Interestingly, the company has changed both its CEO and CFO this year. Patrick Malloy was appointed the new CEO in April 2022. He replaced David Tusa who had been the CEO since 2010.

In February 2022, Eric Bauer was appointed CFO, replacing Diana Diaz, who stayed with the company as Chief Accounting Officer. Prior to joining Sharps, Mr. Bauer was CFO at another Houston public company, Nuverra Environmental Solutions.

The acquisition came about after Andrew Wilson, a partner at Aurora, placed an unsolicited telephone call to Patrick Malloy, congratulating him on his appointment as the new CEO. Mr. Wilson and Mr. Malloy met a week later, at which time Mr. Wilson expressed a high level preliminary interest in acquiring the company. (Aurora already owns Curtis Bay Medical Waste Services).

Sharps had retained Raymond James in August 2021 to assist the company in seeking acquisitions and they were able to pivot quickly to negotiate with Aurora and assess the merits of the offer.

The offer price of $8.75 represents a premium of 207% over the $2.85 per share price as of July 11, the last day before the announcement of the merger. This time last year, the stock was trading between $9 and $10 per share.

SEC filing – Sharps Compliance – Aurora

Sugar Land petrochemical company taken private for $247 million

The company manufactures specialty petrochemical products and waxes from its two plants in Silsbee, TX (30 miles north of Beaumont) and Pasadena, TX. It has revenues of $300 million.

The company was originally formed in 1967 as the Arabian Shield Development Company. The company’s original intent was to develop a copper and zinc mine in southwestern Saudi Arabia. It went public in 1972 and continued to raise funds to develop the mine.



In 1987, the company made its first acquisition in the US by buying the facility in Silsbee. By 2006, the company hived off the Saudi mine into a joint venture as it realized it would cost more than anticipated to complete it. The mine eventually started commercial production in 2012.

In 2015, the company changed its name to Trecora Resources. Its sold its 33% stake in the mine JV in 2019 for $70 million.

In late 2020, the company, with the help of its adviser, Guggenheim Securities, began exploring a merger-of-equals transaction in which Trecora would be the acquiror. However, in late summer 2021, after spending nearly $5 million in fees, the Board pulled out of the proposed transaction.

Also, in 2021, two separate activist shareholders, not acting in concert, amassed a combined 20% stake in the company. Both were critical of the Board and management’s strategy for the company. Both believed the company should put itself up for sale.

The company did just that in October 2021. It contacted 72 financial and strategic acquirers. After a formal bidding process, Balmoral won out, paying 11.4 times 2021 adjusted EBITDA.

All the officers of the company are staying on in their roles.

[06-30-22 – UPDATE Trecora filed an 8-K with the SEC.  CEO Patrick Quarles has left the company to be replaced by new hire, Brad Crocker, who is currently the CEO of another portfolio company of Balmoral.  Mr. Quarles will get a golden parachute payment of cash and equity worth $4.4 million.]

SEC filing – Trecora taken private

US Well Services to be acquired by ProFrac

US Well Services Nyx Clean Fleet® Frac Unit – patented PowerCube delivers true redundancy power to two separate electric motors and pumps.

[Update Nov 1 2022 – The deal has now closed]

US Well Services has agreed to be taken over by ProFrac in an all-stock deal that values the equity at around $93 million.

USWS, based in the Galleria, was founded in 2012 and was taken public for $274 million by a SPAC in November 2018. It currently operates five electric frac fleets and one diesel unit.



USWS also has about $265 million in debt. This includes $110 million of convertible loan notes. As part of the deal, ProFrac will issue stock worth $177 million to eliminate these notes. ProFrac also intends to refinance the remaining long-term debt.

Just last month, USWS announced leadership changes that resulted in Kyle O’Neil being promoted from CFO to CEO.

ProFrac just went public in May 2022 via a $288 million IPO. It has its head office in Willow Park, west of Fort Worth.  With the acquisition, ProFrac will leapfrog Liberty Oilfield and Nextier become the second largest pressure pumper by horsepower, behind only Halliburton.

ProFrac was founded by the Dan and Farris Wilks in 2016. Prior to that, they created Frac Tech in 2002 which the brothers sold in 2011 for $3.5 billion. Dan and Farris are not on the Board of ProFrac. However, Matt, son of Dan, is Executive Chairman, while Ladd, son of Farris, is CEO.

ProFrac, through an affiliate, already owned 13% of USWS. It acquired its stake in 2021. At the same time, ProFrac also paid $22.5 million to USWS for licenses to build three electric frac fleets. Under that agreement ProFrac also expected to pay USWS $22.5 million a year, over the next four years, for additional licenses. With the acquisition of USWS, ProFrac will no longer have to pay those additional fees.

ProFrac also expects to generate $35 million in synergies in 2023. $13 million of this will come from the elimination of duplicate corporate and field overheads, while $12 million will result from reduced repair and maintenance costs (primarily by using in-house manufacturing facilities). $5 million each will arise from supply chain synergies and reduced maintenance capex.

ProFrac also owns 23% of Flotek Industries, another struggling Houston oilfield services company.  In addition, companies affiliated with the Wilks brothers also own 7% of Nextier and 9% of ProPetro Holdings, another pressure pumper. They also took Carbo Ceramics private in March 2020.

The deal for USWS is expected to close in the fourth quarter.

Investor Presentation

Houston healthcare company goes public via reverse takeover

Nutex Health, a Houston-based operator of micro-hospitals, has gone public via a reverse takeover with Florida-based Clinigence Holdings.



Nutex owns and operates 14 facilities, with another 17 under construction. The hospitals offer emergency room care, inpatient care and behavioral health services. Most of the hospitals have less than 10 beds. Some of the hospitals are 100% owned by Nutex. Others are partly owned by physicians who provide services at that hospital.

Nutex was founded in 2011 by Chairman and CEO Tom Vo, M.D. The company has its head office in the Galleria area. It plans to open 100 micro-hospitals across the USA.

Clinigence started out as a healthcare information technology company. However, in early 2021, it pivoted to acquire AHP Health Management Services, which provides care for 22,000 patients in Los Angeles, though a network of 141 primary care physicians and 660 specialists.  AHP receives a fee per member, per month. Its shares were traded over-the-counter, but following the merger, the shares now trade on Nasdaq.

Nutex is forecasting revenues of $366 million for 2022 and an adjusted EBITDA of $201 million. In the merger it was valued $1.6 billion.

The CFO of the company will be Mike Bowen. He is based in Florida and has been the CFO of Accountable Healthcare America (AHA) since 2014. AHA, a medical management platform company, was acquired by Clinigence the same day it acquired AHP.

SEC filing – Nutex Health merger

E&P companies to combine in $6 billion transaction

[UPDATE 07-07-22 The deal has now been completed. Combined group is now called Chord Energy].

Two E&P companies, Oasis Petroleum and Whiting Petroleum are merging in a $6 billion deal, including debt. Oasis is based in downtown Houston, while Whiting has its head office in Denver. The combined company will have its head office in Houston and will have a new, yet-to-be-determined name. The Denver office will remain open for the foreseeable future.



Both companies have their main operations in the Williston Basin of North Dakota, Montana and Saskatchewan. (The Bakken is the main oil-producing rock formation of the Basin, but there are others). In terms of acreage, the deal combines the number 3 and 4 players into the largest operator in the Basin, ahead of Continental Resources and ConocoPhillips.

Both companies filed for pre-packaged bankruptcies in 2020. Whiting filed first, in April 2020 and exited in September 2020, having converted $2.4 billion of debt into equity. Likewise, Oasis filed in September 2020 and exited three months later. It converted $1.9 million of debt into equity.

After exiting bankruptcy, Oasis sold its Permian Basin acreage for more than $400 million and bought assets in the Williston Basin from Diamondback Energy for $745 million.

Management

Both companies have CEOs who were appointed after exiting Chapter 11. Lynn Peterson, the CEO of Whiting, was appointed in September 2020. He will become Chairman of the combined company. Danny Brown, CEO of Oasis, joined in April 2021. Previously, he was head of US onshore operations for Anadarko. Mr. Brown will be the CEO of the combined company.

Longtime Oasis CFO Michael Lou will be the CFO of the combined company.

Transaction structure

The deal is a combined stock and cash deal. Oasis is the surviving entity and its shareholders will get a special dividend of $15 a share. Whiting shareholders will get 0.5774 shares of Oasis and $6.25 in cash for each share of Whiting they own. Once the deal closes later this year, Whiting shareholders will own about 53% of the combined company.

The company expects to achieve savings of $65 million by the end of 2023. $30 million will come from administrative savings, the rest will come from operational cost synergies.

Oasis – Whiting Investor Presentation