Dril-Quip and Innovex Downhole Solutions have agreed to merge, creating a ‘unique’ industrial platform for onshore and offshore oil and gas sector.
In an all-stock transaction, Dril-Quip will combine its drilling and production equipment expertise with Innovex’ competence in well lifecycle technologies and services, creating a complementary combination with increased scale, diverse product portfolio and geographic footprint.
The merger immediately improves pro forma company’s profitability and free cash flow generation including estimated cost synergies of approximately $30 million per year, the partners said.
Upon closing of the transaction, Dril-Quip stockholders will own approximately 52% and Innovex stockholders will own approximately 48% of the combined company on a fully diluted basis.
The combined company is expected to derive approximately 56% of its revenue from the international and offshore markets and approximately 44% from the North American onshore markets (U.S. and Canada).
It would have more than $1 billion in annual revenue and $221 million in adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (adjusted EBITDA) including synergies in fiscal 2023 (all figures on a pro forma, full-year 2023 combined basis).
The combined company will have a strong balance sheet with a pro forma, year-end 2023 net cash position of $99 million, according to the companies.
“The multi-decade 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 service to our customers and create opportunities for our employees.
“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,” said Jeffrey Bird, Dril-Quip President and Chief Executive Officer.
“We are bringing together the great traditions and capabilities of Dril-Quip with Innovex’s proven operating model. By empowering the combined organization using Innovex’s collaborative ‘No Barriers’ culture, we will unleash the capabilities of the combined company to create a unique energy industrial platform with durable margins, low capital intensity and the potential for superior returns on capital throughout industry cycles,” added Adam Anderson, Innovex Chief Executive Officer.
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