Cerberus Capital Management LP-backed Keane Group Holdings LLC said Tuesday, Jan. 26, that it agreed to buy most of the U.S. assets of Canada’s Trican Well Service Ltd. for $247 million.
The price includes $200 million in cash plus a minority interest in Keane. The Houston buyer anticipated it would close the deal by mid-March if it clears a Hart-Scott-Rodino Antitrust Improvement Act review.
Trican would receive a $20 million breakup fee if Keane couldn’t finance the deal and a $55 million fee if Keane couldn’t close the transaction under other unnamed circumstances.
The transaction was expected, as Trican said two weeks ago it was negotiating to sell the assets to Keane.
Trican, meanwhile, said it also has reached agreement with the bank lenders under its revolving credit facility and senior note holders to amend its credit documentation if the sale closes. The agreement includes removing prior financial covenants until the third quarter, eliminating minimum Ebitda and liquidity covenants and giving the Calgary, Alberta oilfield services company new leverage ratio and interest coverage covenants.
The seller said it will end up with 10% of the shares of Keane Group; if a Keane liquidity event occurred, Trican also would receive up to an additional 20% economic participation interest above unnamed thresholds. It also will gain two seats on Keane’s board.
Trican estimated the 10% stake to be worth between C$67 million and C$120 million, making the total deal worth between C$352 million and C$405 million ($248 million and $286 million).
The Canadian company expected to use the proceeds to cut its debt to C$235 million. Since December Trican said it has shrunk its long-term debt by more than C$540 million, including the proceeds from this deal.
Keane Group said the acquisition will triple its fracturing capacity to more than 950,000 horsepower, add access to proprietary technology and applied engineering capabilities and give it new service lines, including cementing, coiled-tubing, nitrogen pumping and acidizing. It also will expand operations into more basins in Texas and the Mid-continent and deepen its presence in the Permian, Bakken and Marcellus/Utica basins.
“This acquisition will significantly strengthen Keane’s position as a leader in the completion services business across all key U.S. basins,” Keane Group chairman and CEO James Stewart said in the statement. “With our expanded capabilities, Keane Group will have significantly greater scale that will enable us to provide all customers cost-effective completion services that will maximize the return on their assets in the current low commodity price environment.”
Stewart added that with a strong balance sheet, the company plans to play an active role in more industry consolidation.
Trican CEO Dale Dusterhoft in a statement said the transaction will strengthen the company’s balance sheet and will allow it to focus on generating profits from its remaining businesses, which include its completion solutions, geological services and industrial services units in Canada and the U.S.
“The retained equity interest and additional economic interests in Keane provide Trican with upside leverage to a recovery in the U.S. pressure pumping sector and alignment with Keane’s high-quality, proven management team and platform,” he said.
Trican has been hit hard like the rest of the oil and gas industry after the slide in commodity prices. In November it said it had idled its last two fracturing crews in Texas, leaving only six of its 16 U.S. pressure pumping units still operating. In August it received C$197 million for its Russian pressure pumping business from OAO Rosneft, which was negotiating to buy its Kazakhstan operations as well.
Trican expanded into Texas back in March 2007 with its $264 million acquisition of a 93% stake in Liberty Pressure Pumping LP.
Houlihan Lokey Inc.’s Cory Daugard, Stephen Hardin and Michael Nguyen and Schulte Roth & Zabel LLP’s Stuart Freedman, Frank Steinherr, Andrew Fadale, Caitlin Cornell, Stavan Desai, Kirby Chin, Kurt Rosell, Robert Kiesel and John Garces advised Keane on the Trican deal.
RBC Capital Markets’ Blair Fleming assisted Trican, which used Jim Fox, Shay Kuperman, Michael Collins, Elizabeth Bellows, Peter Mims, Tom Wilson, Larry Nettles, Neil Imus and Jim Meyer of Vinson & Elkins LLP for outside legal counsel.
Source: The Deal
