Expro and Frank’s International Create Billion-Dollar Service Company With Zero Debt
The combined company will move forward as Expro Group and maintain an operational headquarters in Houston.
Oilfield service companies Expro Group and Frank’s International announced today an all-stock merger that the two firms say will form a “full-cycle service provider.”
Shareholders of UK-based Expro will take on a 65% stake in the combined company, which on a pro forma basis expects to generate more than $1 billion in revenue annually. Expro, founded in 1973, is one of the industry’s largest developers of well intervention and flow assurance technologies.
Founded in 1938, Frank’s portfolio focuses on drilling and completions technologies and services. Shareholders of the Houston-based company will own 35% of the merged firm which will maintain its operational headquarters in Houston and move forward under the name of Expro Group.
Following the merger, privately held Expro will trade its shares on the New York Stock Exchange. Frank’s has been a publicly traded company since 2013.
The companies highlighted that the consolidated service provider will have “a strong, debt-free balance sheet” and that it expects to be generating free cash flow in spite of downcycles.
“Together, Expro and Frank’s will be better positioned to support our customers around the world and navigate industry cyclicality,” said Mike Jardon, CEO of Expro, in the announcement. “This business combination also allows us to rationalize facilities and other support costs, optimize business processes, capitalize on profitable growth opportunities and create value for shareholders of both companies, particularly as the environment for international projects continues to improve.”
In addition to its clean balance sheet, the pro forma Expro will emerge with almost $285 million of cash in hand and expects to realize $55 million in cost savings over the first year. The annual cost synergies should swell to $70 million after 3 years, the companies said.
Another of the chief selling points of the deal is that a merged company would have a more complete onshore and offshore product offering that touches drilling, completions, production, and decommissioning. Executives say this will help the new Expro take fuller advantage of work opportunities during the recovery phase.
Expro and Frank’s also boast a global footprint with combined operations in 50 countries. Expro’s legacy business in the Middle East, North Africa, and other Asian markets is expected to give Frank’s service line stronger exposure to these regions.
Jardon will remain CEO of the combined company while Frank’s CEO Mike Kearney will transition to the chairman role. Additionally, Expro will appoint five board members and Frank’s will appoint two.
“After undertaking a thorough process to consider a range of strategic alternatives, we are confident that this transaction presents a compelling opportunity for Frank’s shareholders to benefit from value creation led by returns-focused growth,” Kearney said in a statement.
Since last year's downturn, industry analysts have widely expected to see consolidation in the oilfield service space via low or no-premium mergers. Prior to the deal's announcement, shares of Frank's had been trading at around $5. Under the terms both boards agreed to, Expro investors will receive about 7.2 shares of Frank's for every share of Expro they currently hold.
Post-merger, Expro will keep in place its commitment to lower its carbon intensity by 50% over the next decade and reach a net-zero emissions status by 2050.
Subject to shareholder approval, the companies expect the transaction to close in the third quarter of the year.