Oilfield equipment and service providers Dril-Quip and Innovex Downhole Solutions (IDS) are teaming up in an all-stock deal to create a strong energy platform.
The transaction will combine the companies' product and service portfolios under a new name, Innovex International. According to the 18 March press release, about 56% of the new company’s revenue will come from international and offshore markets, with the rest from onshore markets in the US and Canada.
The combined company said expects to have over $1.0 billion in annual revenue and $221 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), including synergies in fiscal 2023 (all figures on a pro forma, full-year 2023 combined basis). The company said it will start with a strong balance sheet with a year-end 2023 net cash of $99 million.
In the release, Jeffrey Bird, Dril-Quip's president and chief executive, said that he sees the transaction as aligned with the company's growth strategy.
“It will advance our position as a leading developer and provider of highly engineered and innovative equipment, services, and technologies for the global oil and gas industry. The multidecade legacy and strong reputation of Dril-Quip’s technology, brand, and expertise, paired with the customer-centric, innovative, and execution-oriented cultures of both companies, will help us continue to manufacture and deliver innovative products and services to our customers and create opportunities for our employees,” he said.
“Additionally, the complementary global scale and product breadth of the combined company will provide a strong platform for organic revenue growth, strong EBITDA margins, and the potential for significant free cash flow generation to drive value for our stockholders.”
Adam Anderson, Innovex's chief executive, said, " By empowering the combined organization using Innovex’s collaborative ‘No Barriers’ culture, we will unleash the combined company's capabilities to create a unique energy industrial platform with durable margins, low capital intensity, and the potential for superior returns on capital throughout industry cycles.”
Anderson will serve as the new company’s CEO. It will be headquartered in Houston, where both companies are currently based.
While speaking with investors about the deal, he said, “This combination is the rare instance where there’s a tremendous amount of industrial logic on various ways for us to win with our products and service redundancy between the two companies.”
For example, the combined company said it will use Innovex infrastructure to market Dril-Quip’s onshore wellheads in the US while growing Innovex’s product suite in Canada by leveraging Dril-Quip’s infrastructure. The combined company aims to increase its global scale and footprint in growing markets such as Saudi Arabia, Mexico, South America, and Asia Pacific.
After the merger, Dril-Quip shareholders will own about 52% of the new company, and IDS shareholders will own about 48%. The combined company's board of directors will have nine members. This includes four independent directors from Dril-Quip's current board, four directors from Innovex's current board, and CEO Adam Anderson. John Lovoi, Dril-Quip's current chairman, will become the chairman of the combined company's board.
