Tag Archives: M&A

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

Houston oilfield service companies combining in $3 billion transaction

Two Houston-based oilfield service companies, Expro Group and Frank’s International are combining in an all-stock transaction worth about $3 billion.



Technically, Expro has its head office in the Reading, UK but its CEO and CFO are based in Houston. Similarly, Frank’s has its official head office in The Netherlands but its operational head office is in west Houston. Frank’s is publicly-traded, while Expro was a UK public company until it was taken private by a private equity consortium in 2008. Expro later filed for a pre-packaged Chapter 11 bankruptcy in December 2017.

Expro is a leading provider of well flow optimization solutions, while Frank’s is a leader in tubular running and other services related to well construction. The combined business had revenues of about $1.1 billion in 2020.

Expro in charge

Although it has been billed as a merger, it is Expro that is taking over Frank’s. Expro shareholders will own 65% of the combined business and the Expro CEO Mike Jardon and the Expro CFO Quinn Fanning (ex CFO of Tidewater) will take over those roles in the combined business. The business will be renamed Expro Group, though Frank’s will be kept as a brand name.

In 2020, Expro made $98 million adjusted EBITDA on $675 million revenue. Frank’s only had EBITDA of $9 million on $390 million revenue. Frank’s went public in 2013 and has been  dysfunctional ever since. When current CEO Mike Kearney was appointed to that role in September 2017, he was the fourth CEO in three years. Likewise, Melissa Cougle became the third CFO in just over four years when she was appointed in May 2019.

Frank’s CEO becomes Chairman

Mr. Kearney will become Chairman of the combined group. As a result of him giving up the CEO position, all his outstanding equity awards will vest. The company didn’t quantify the amount but it is likely to be worth a few million.

There was no word on the fate of Ms. Cougle or the other executive officers of Frank’s.

The companies expect to realize annualized savings of $70 million, with $40 million from support and indirect costs and $10 million from rationalizing facilities.

The deal is expected to close in the third quarter.

Expro – Frank’s Investor Presentation

Houston blank check company to take security screening company public

 

NewHold Investment Corp will take Evolv Technology public in a transaction that values the business at $1.25 billion. Evolv is a leader in AI touchless security screening with its head office in the Boston area.



The technology uses artificial intelligence and data science to screen people for weapons and other threats. The company says its platform eliminates the need for devices like metal detectors and physical security checks. It is used at venues such as Six Flags amusement parks, the Lincoln Center in New York and at the stadiums of the New England Patriots, Chicago Cubs and Manchester City.

Evolv has some high profile backers. Bill Gates is a shareholder and the $300 million stock private investment (PIPE) will include investments from Peyton Manning, Andre Agassi, Steffi Grafi, Joe Torre and Theo Epstein.

Customers pay a monthly subscription for using the service, rather than buy hardware. In 2020 the company had 209 units deployed, generating revenues of $4.3 million. It lost $26 million at the EBITDA level. However, the company projects it will have over 8,000 units deployed by 2025 and revenues of $595 million.

NewHold raised $150 million in an IPO in July 2020. The deal is expected to close in the second quarter.

Evolv Investor Presentation

Houston blank check company to take bitcoin miner public

Good Works Acquisition Corp has agreed to a reverse takeover of Cipher Mining Technologies. Cipher is a newly-formed US-based Bitcoin mining company that is being carved out of New York-based Bitfury Group. Bitfury provides Bitcoin mining hardware and other blockchain software and services.



Good Works went public in October 2020 with an initial public offering of $150 million.

The transaction values the combined group at $2 billion. In addition, the business will have $500 million of cash on hand (and no debt). That will allow Cipher to build out its operations.

Currently there are about 18.6 million Bitcoins in circulation out of a maximum supply of 21 million. That was set in 2008 by its inventor, Satoshi Nakamoto (probably a pseudonym for unknown persons). As part of its records creation process, more and more computing power is needed to create new Bitcoins. Currently China accounts for about 65% of all Bitcoins mined globally.

Cipher intends to initially build 4 data centers (3 in Texas, 1 in Ohio) with a power capacity of 445 MW. These will be built in 2021 and 2022. The business plans to expand these data centers between 2023-2025 with an additional 300 MW of power. By 2025, the business intends to mine 21,000 Bitcoins.

The company states that it has 5 year supply contracts with CloudHQ and Vistra for Texas at an average price of 2.7 cents per kWH. However, the small print in the investor presentations state these are letter of intent prices. It will be interesting to see if proposed solutions to the recent Texas power grid problems will significantly impact the rate.

SEC filing – Good Works Cipher merger

 

Houston blank check company finds acquisition target

Houston blank check company, Peridot Acquisition Corp, has agreed to buy Li-Cycle for $1.1 billion in a reverse takeover. Li-Cycle is a lithium-ion battery recycling company, based in Toronto.



Peridot went public in September 2020 with the aim of finding an acquisition in the environmental infrastructure or renewables sector, so Li-Cycle definitely fits the bill.

Li-Cycle aims to recycle electric vehicles batteries. In addition to end of lifecycle recycling, 5%-10% of battery production is rejected as waste during the manufacturing process. As EV production ramps, Li-Cycle sees a big and growing market. It uses a non-thermal process to recycle the batteries, allowing it to recover 95% of the battery mass.

Li-Cycle is still in a start-up phase. It currently has three locations in North America that shred and mechanically separate batteries. The company is also developing a hub in Rochester, New York that will produce, at scale, lithium carbonate, Nickel Sulphate and other high-grade minerals for resale.

It has signed 40 commercial contracts with suppliers, including over $900 million in contracted off-take.

The deal values Li-Cycle at 10 times 2023 projected EBITDA. At close, the business will have $566 million in cash on hand. That will allow Li-Cycle to fund the capital expenditures required to complete its business plan.

The combined company will be led by Li-Cycle CEO Ajay Kochhar. Fellow co-founder Tim Johnson will be the Executive Chairman. Peridot CEO Alan Levande will join the Board, as will Scott Prochazka, ex-CEO of Centerpoint Energy.

SEC filing – Peridot Li-Cycle acquisition

 

Chevron proposes to buy out Noble Midstream Partners

Four months after Chevron acquired Noble Energy, it has submitted a non-binding proposal to acquire all the publicly-held common units of Noble Midstream Partners LP (‘NBLX’).



Chevron already owns 62.5% of NBLX, through its acquisition of Noble Energy. It is also the biggest customer of NBLX, with about 60% of revenues generated from Chevron. So the deal is going through, it’s just a question at what price.

Chevron’s proposal was $12.47 per common unit, which meant no premium to the closing price on February 4. NBLX’s price ended up at $13.30 the following day, suggesting the market expects Chevron to sweeten the pot.  A year ago, the units were trading at $22 per unit.

This continues the trend of publicly-traded MLP’s being reabsorbed into their former parent companies. Other Houston-area examples in recent years are;

 

SEC filing – Chevron – Noble Midstream proposal

Fertitta Entertainment to go public via reverse takeover

Fertitta Entertainment Inc (‘FEI’), the parent company of Landry’s restaurants and Golden Nugget casinos is to go public through a reverse takeover of FAST Acquisition, a blank check company.

The transaction values FEI at $6.6 billion enterprise valuation.



Tilman Fertitta, the sole owner of FEI, will continue to the be the Chairman and CEO of the company and will remain the largest shareholder, owning about 59% after the deal closes.

The business operates 446 full service restaurants such as Morton’s steakhouse, De Frisco’s, Saltgrass and Rainforest Cafe. It also owns 5 Golden Nugget Casinos in Atlantic City, Las Vegas, Laughlin, Lake Charles and Biloxi.

Both the restaurants and the casinos seem to be holding up better than its publicly-traded competitors.  For the third quarter of 2020, revenues for the restaurant division were $494 million, down 32% on the same quarter in 2019. However, adjusted EBITDA was $101 million, down only 17% on the corresponding period.

For the casinos, third quarter revenues dropped 30% to $176 million. However, adjusted EBITDA only dropped by $6 million to $72.5 million (41.1% margin).

FEI also owns 79.9% of the voting rights of Golden Nugget Online Gaming. This business was sold by FEI in December 2020  to a blank check company that had been launched by Mr. Fertitta (Landcadia Holdings II).

Landry’s was public before

Landry’s originally went public in 1993 when it had 9 restaurants. In 2010, the business had 200 restaurants and Mr. Fertitta took it private in a $1.4 billion transaction.

Mr. Fertitta had considered going public via an Initial Public Offering (IPO) but decided that he could access capital markets faster and with more certainty if it did a deal with FAST.  The blank check company went public in August 2020 and was led by Sandy Beall, an experienced restauranteur and hospitality founder.

FEI also owns the Houston Rockets. That business is not part of the transaction.

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

SEC filing – FEI FAST acquisition