Transaction & Business Highlights
- Acquisition of a leading manufacturer and provider of
differentiated onshore spoolable pipe technologies and associated
installation services
- Enhances Cactus’ position as premier provider of highly
engineered equipment to the exploration & production
(“E&P”) industry and expands reach further downstream
- Strong through-cycle margin profile, modest capital
requirements and attractive growth potential
- Transaction is expected to be accretive to first year financial
metrics
Cactus, Inc. (NYSE: WHD) (“Cactus” or the “Company”) announced
today that it has entered into a definitive agreement (the
“Agreement”) to acquire FlexSteel Technologies Holdings, Inc. and
its affiliates through a merger with its holding company, HighRidge
Resources, Inc. (“FlexSteel”) and Atlas Merger Sub, LLC, a newly
formed subsidiary of Cactus, Inc. FlexSteel is a market-leading
manufacturer of spoolable pipe technologies primarily purchased by
customers during the production phases of a well’s lifecycle.
Scott Bender, President and CEO of Cactus, commented, “This
acquisition enhances Cactus’ position as a premier manufacturer of
specialized technologies delivered directly to our industry’s
end-users. FlexSteel’s products combine the durability and
reliability of steel with the speed and efficiency of spoolables.
FlexSteel shares many characteristics with Cactus, including:
1) technologically differentiated products and services that
increase customer efficiency, 2) state of the art
manufacturing capabilities, 3) strong through-cycle margins,
4) modest capital requirements and 5) significant
growth in recent years. Both businesses have succeeded by making
highly technical sales to market-leading customers. FlexSteel’s
products are also highly complementary to Cactus’ equipment at the
wellsite. As such, we believe this company meets the exacting
criteria we have described over the last several years.
FlexSteel also provides meaningful growth potential driven by:
1) the industry’s shift away from legacy offerings in favor
of more technologically advanced solutions, 2) customers’
trend toward larger diameter products and 3) penetration
into new markets such as midstream, international, shallow-water,
and carbon capture.
Over time, we expect to realize the benefits of cost
efficiencies by implementing our existing supply chain expertise
and utilizing the combined Company’s infrastructure to deliver
specialized products to an expanded customer base.”
Cactus is acquiring FlexSteel on a cash-free, debt-free basis,
for total upfront consideration of approximately $621 million,
subject to customary purchase price adjustments. The closing is
expected to occur in early 2023 and is subject to regulatory
approvals and other customary conditions. In addition to the
upfront consideration, there is a potential future earn-out payment
of up to $75 million to be paid in mid-2024 if certain revenue
growth targets are met by FlexSteel.
FlexSteel’s current President and CEO, Thirucherai
Sathyanarayanan, will continue to lead the business, which
generated revenue of approximately $265 million for the nine months
ended September 30, 2022.
Transaction Financing Details
Cactus has obtained fully committed bridge financing that it can
use to fund the upfront purchase price together with cash on hand.
The Company intends to finance the acquisition of FlexSteel through
a mix of cash, debt and/or equity. The Company is targeting net
debt to 2022 adjusted EBITDA for the combined company of less than
1.0x at closing and expects to reduce leverage through internal
cash generation thereafter.
Advisors
J.P. Morgan Securities LLC is serving as the exclusive financial
advisor to Cactus and Bracewell LLP is serving as legal counsel in
association with the transaction. Morgan Stanley & Co. LLC is
serving as financial advisor to FlexSteel and Vinson & Elkins
LLP is acting as legal counsel on the transaction.
Conference Call & Webcast Information
Cactus will host a conference call to discuss the acquisition on
Tuesday, January 3, 2023 at 10:00 a.m. Central Time (11:00 a.m.
Eastern Time). The call will be webcast on Cactus’ website at
www.CactusWHD.com. Please access the webcast for the call at least
10 minutes ahead of start time to ensure a proper connection. In
addition, a presentation with additional information relating to
the FlexSteel acquisition is available on the Company’s website at
www.CactusWHD.com.
About Cactus, Inc.
Cactus designs, manufactures, sells and rents a range of highly
engineered wellhead and pressure control equipment. Its products
are sold and rented principally for onshore unconventional oil and
gas wells and are utilized during the drilling, completion and
production phases of its customers’ wells. In addition, it provides
field services for all its products and rental items to assist with
the installation, maintenance and handling of the wellhead and
pressure control equipment. Cactus operates service centers
throughout the United States and Australia, while also providing
equipment and services in select international markets.
About FlexSteel
FlexSteel designs, manufactures, sells and installs highly
engineered spoolable pipe technologies. FlexSteel’s steel
reinforced pipeline solutions are sold principally for onshore oil
and gas wells and are utilized during the production phases of its
customers’ wells. FlexSteel’s technology combines the durability of
steel with the installation, performance and cost benefits of
spoolable pipe products. FlexSteel operates service centers
throughout the United States and Canada, while also providing
equipment and services in select international markets.
Cautionary Statement Concerning Forward-Looking
Statements
Certain statements contained in this press release constitute
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks, uncertainties and other factors,
many of which are outside of Cactus’ control, that could cause
actual results to differ materially from the results discussed in
the forward-looking statements.
Forward-looking statements can be identified by the use of
forward-looking terminology including “may,” “believe,” “expect,”
“intend,” “anticipate,” “estimate,” “continue,” “potential,”
“will,” “hope” or other similar words and include the Company’s
expectation of future performance contained herein. These
statements discuss future expectations, contain projections of
results of operations or of financial condition, or state other
“forward-looking” information. You are cautioned not to place undue
reliance on any forward-looking statements, which can be affected
by assumptions used or by risks or uncertainties, including
unanticipated challenges relating to the proposed transaction and
related financing. Consequently, no forward-looking statements can
be guaranteed. When considering these forward-looking statements,
you should keep in mind the risk factors and other factors noted in
the Company’s Annual Report on Form 10-K, any Quarterly Reports on
Form 10-Q and the other documents that the Company files with the
Securities and Exchange Commission. The risk factors and other
factors noted therein could cause actual results to differ
materially from those contained in any forward-looking statement.
Cactus disclaims any duty to update and does not intend to update
any forward-looking statements, all of which are expressly
qualified by the statements in this section, to reflect events or
circumstances after the date of this presentation.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230103005202/en/
Cactus, Inc. John Fitzgerald, 713-904-4655 Director of
Corporate Development and Investor Relations IR@CactusWHD.com
Cactus (NYSE:WHD)
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