Tag Archives: M&A

TETRA Technologies sells most of its interests in CSI Compresso

TETRA Technologies has sold most of its interests in CSI Compresso for $30.7 million. As a result, Compresso will no longer be consolidated in the results of Tetra. Both companies are publicly-traded and based in The Woodlands.



TETRA is mainly involved in completion fluids. It’s also the largest producer of Calcium Chloride which has many non-oilfield uses such as de-icing products. CSI Compresso provides compression services and equipment for natural gas and oil production.

The buyer of TETRA’s stake is Spartan Energy Partners, a PE-backed company, also based in The Woodlands. Spartan provides gas treatment, compression and processing solutions. Tetra will retain an 11% stake in CSI Compresso.

New management at CSI Compresso

TETRA’s CEO and CFO also held the same roles at CSI Compresso. They have resigned from the latter to be replaced by John Jackson, CEO of Spartan and Jonathan Byers, Head of Corporate Development at Spartan. Mr. Byers joined Spartan in 2010. Prior to that. he worked at Price Gregory and SCF Partners.

In connection with the sale, TETRA will continue to supply accounting, IT and other back office services to CSI Compresso for up to one year.

Compresso debt weighing down TETRA

TETRA and CSI Compresso always seemed an odd mix as the asset and capital structure required for the businesses are very different. Prior to the sale, TETRA had $843 million of debt, of which $637 million related to CSI Compresso. Even though there were no cross default provisions or cross guarantees on the debt, management felt the high debt levels weighed down TETRA’s stock price.

The deal brings to a close one of the more poorly-timed transactions in oilfield history. TETRA had a relatively small compression division until it agreed to buy Compressor Systems for $825 million in cash in July 2014. At the time, West Texas crude oil prices were over $100 a barrel. Oops.

SEC filing – TETRA sale of CSI Compresso

As an aside, Bloomberg published an article in October 2020 that stated that Calcium Chloride produced in TETRA’s Finland factory was being shipped to Peru, smuggled into Ecuador and used in cocaine production by Columbian drug lords. Not the non-oilfield diversification that TETRA was looking for! Bloomberg didn’t allege that TETRA had done anything wrong.

 

Houston blank check company agrees to reverse takeover

Landcadia Holdings III, the third blank check company taken public by Tilman Fertitta and Jefferies, has agreed to a reverse takeover with The Hillman Group. The deal values Hillman at $2.64 billion.



Landcadia III went public in October 2020. At the time, the company said that it intended to search for opportunities in the consumer, dining, hospitality, entertainment and gaming industries. Landcadia I became Waitr Holdings (online food ordering and delivery) while Landcadia II recently closed on its deal and became Golden Nugget Online Gaming.  In a left turn, Hillman is not involved in these sectors at all. It distributes hardware to retailers.

Hillman distributes fasteners and work gear to Lowe’s, Home Deport and Walmart. It also has 32,500 machines that cut keys, fobs and perform knife sharpening. Impressively, the business has grown organically in 55 of the 56 years it has been in existence. The one year it didn’t grow was 2009 when sales fell 5%.

The deal is expected to close in the second quarter of 2021. After the close, Mr. Fertitta will have no role in the company, other than being a small shareholder. The company will be based in Cincinnati.

SEC filing – Landcadia III Hillman transaction

Cardtronics accepts higher bid from NCR

NCR has agreed to buy Houston-based Cardtronics for $1.8 billion or $39 a share. Last month, the company had accepted a bid of $35 a share from two private equity firms, Apollo Global Management and Hudson Executive Capital.



Cardtronics is the world’s largest ATM operator with 285,000 ATMs in 10 countries. 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.

NCR, based in Atlanta, makes ATMs as well as point-of-sale systems and self-service kiosks for businesses such as retailers and restaurants. It has revenues of $6.2 billion, over four times the revenue of Cardtronics.

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.

Timeline of the deal

According to the proxy statement filed earlier this month, the company first approached private equity firms in May 2019. Apollo was one of them and they submitted a non-binding indication of interest in June 2019. The Board did not it compelling enough and shelved discussions.

After the company withdrew its 2020 annual guidance in April 2020, Apollo again reached out to the company, expressing interest in the company. In August, Apollo approached Hudson about teaming up on a transaction. The firms subsequently submitted an oral offer of between $30 and $32 a share.

In October, the Board decided to seek alternative partners. Goldman Sachs approached 8 different parties. NCR was not one of the 8. Only one of these parties submitted a non-binding offer of interest and even that party did not want to pursue a deal in the timeline set by the company.

Two days after Cardtronics disclosed on December 9 that it has received a proposal from the PE firms for $31 a share, NCR contacted the company, expressing interest. Three days, NCR submitted a written bid for $36 a share.  On New Year’s Eve, NCR upped the bid to $39 a share.

Fees and Golden Parachutes

Under the terms of the agreement with the PE firms, Cardtronics would have to pay a break-up fee of $32.6 million if the company accepted a higher offer. NCR has confirmed that it has paid this fee to the company.

CEO Ed West is line for a golden parachute payment of at least $26.5 million. The four other members of the senior management team will share at least $22 million.

NCR expects annualized cost savings of $100-$120 million.

Goldman Sachs got a fee of $5 million when the deal with the PE firms was initially announced. A further $20 million will be paid when the acquisition closes.

The deal is expected to close in mid-2021.

SEC filing – NCR acquisition of Cardtronics

 

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

[UPDATE March 2, 2021 – Deal has now been completed and TC Pipelines has been delisted].

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