M&A in the U.S. oil and gas exploration and production industry was hot in 2018, hitting its highest total in four years at $84.3 billion, according to Drillinginfo. Eight of the year’s top 10 deals were in the second half.
BP’s $10.5 billion purchase of oil and gas properties from BHP Billiton’s Petrohawk was the biggest deal of the year, showing the British oil giant’s commitment to shale, and Concho Resources, Diamondback Energy and Cimarex Energy all made moves in West Texas’ and New Mexico’s Permian Basin, the firm noted.
However, thanks to sliding oil prices, fourth quarter deal value came in at $20.9 billion, a bit off from its third quarter 2018 high, Drillinginfo said.
Still, expect more dealmaking to come. The firm estimates that there’s $39 billion worth of upstream assets still for sale, with half of the available inventory in the Permian.
On the capital markets front, the energy industry raised $106.8 billion through equity and debt offerings last year, down 20 percent over 2017, Drillinginfo said.
Initial public offerings started the year strong but came to a full stop in the second half of the year, raising just $3 billion via nine issues for all of 2018 versus $8.7 billion in 2017. And while seven S-1s were registered in the second half, market conditions hindered valuations, causing companies to pull their registrations, according to the firm.
“Equity markets were challenged in Q4 and throughout 2018 and debt markets may be soon to follow as Federal Reserve rate hikes make borrowing more expensive,” said Christopher George, director of Drillinginfo unit Capitalize. “Investment-grade issuers, though, managed to get some multi-billion-dollar bonds out the door before year-end.”
Capitalize tracked $16.5 billion worth of equity offerings across all sectors for 2018, a 55 percent decrease over 2017, and $90.3 billion worth of bonds, a 6.5 percent decrease over 2017.
“Against the backdrop of at least two Fed fund rate hikes expected this year, any refinancing by high-yield energy issuers will have to come with higher coupon rates if their debt is part of the massive $700 billion in corporate maturities coming this year,” George said.
Meanwhile, on the venture capital side of dealmaking, PitchBook released its results for 2018, saying that VC invested last year surpassed $100 billion for the first time since the dot-com era, putting $130.9 billion into 8,948 deals. The value was fueled by a rise in late-stage mega-deals ($100 million-plus), which skyrocketed from 2017’s totals capturing $61.1 billion across just 198 transactions.
PitchBook said 2018 saw $120 billion worth of venture capital exits, a 33 percent year-over-year increase; and that last year recorded the highest figure for fundraising thus far, with $55.5 billion raised across 256 funds.
“Despite investors’ concerns of a market downturn, these statistics suggest VCs will have capital to fund innovation for years to come,” the firm said.
In Texas, deal count was decent this past week – there were 15 transactions, versus 18 the previous week and 10 in the same period last year. But deal value was low – $3.819 billion versus $7.28 billion the previous week and $6.28 billion in the same period last year.
There were 12 M&A, private equity, JV and venture capital deals valued at $2.594 billion and three capital markets transactions valued at $1.225 billion.
Sixteen law firms and 76 Texas lawyers worked on the transactions. Industries represented included energy, technology, hospitality and industrial.
M&A, PRIVATE EQUITY, JVs AND VENTURE CAPITAL
Jones Day, White & Case aid on $2.2B SLM-SABIC JV
Jones Day said Jan. 15 that it’s advising South Louisiana Methanol on its agreement to form a $2.2 billion joint venture with SABIC US Methanol, a unit of Saudi Basic Industries Corp., to develop the largest methanol production plant in North America.
Energy partner Jeff Schlegel and associate Kit Rockhill in Houston led the deal team. White & Case is counseling SABIC, including partner Jay Cuclis and associate Cristian Blumm in Houston.
SABIC’s chief counsel for M&A and antitrust is in Maryland but several Texas in-house lawyers for South Louisiana Methanol, or SLM, participated. Tim Hagan is vice president of legal at SLM, which is based in Austin.
SLM, which owns the project, is majority owned by New Zealand’s Todd Corp. and led by CEO Paul Moore. SABIC is majority owned by the Kingdom of Saudi Arabia. Mohammed Al-Wakeel is SABIC US Methanol’s president and CEO.
According to trade publication Business Facilities, the joint venture will create a new methanol complex on a 1,500-acre site on the west bank of the Mississippi River eight miles south of the Sunshine Bridge.
The development will result in 75 new direct jobs in St. James Parish, La., along with an estimated 350 new permanent indirect jobs and 800 construction jobs at peak building activity.
The project was originally announced in 2013 as a project of Texas-based Zeep Inc. and Todd. Preliminary work began last year and formal construction could begin later this year. It’s expected to have production capacity of 2 million metric tons per year.
SLM will be eligible for a $5 million performance-based grant with $1.5 million payable upon the company making at least $150 million in capital expenditures in the state and $3.5 million payable once the plant starts up.
There’s been growing U.S. demand for methanol, which goes into the making of plastics, polyester fibers and fabrics, fuels, pharmaceuticals and adhesives. New supplies of inexpensive natural gas from shale have spurred several methanol projects in Louisiana and could make the U.S. a net exporter of the product in the near future, experts predict.
Baker Botts aids Zix on $275M acquisition, related financing
Baker Botts said Jan. 15 it advised Dallas email security provider Zix Corp. on its $275 million acquisition of AppRiver from Marlin Equity Partners and related debt and equity financings.
The Texas attorneys on the team were partners Don McDermett, Mollie Duckworth, Grant Everett and Luke Weedon and associates Jessica Phillips, Ian Lurie, Jennifer Ybarra, Chad Davis and Malory Weir. Sara Jones was the paralegal.
Specialists included senior associate Tyler Beas on intellectual property, partners Eric Winwood and Steve Marcus, senior associate Marian Fielding and associate Snow Rui on tax and partner Jennifer Trulock on litigation.
Attorneys in Baker Botts’ Washington, D.C. office pitched in on anti-trust and IP matters, as did a lawyer in the firm’s Palo Alto office on corporate issues.
Kirkland & Ellis represented AppRiver with attorneys in the firm’s Palo Alto office.
RBC Capital Markets and Cowen & Co. provided financial advice to Zix while Evercore assisted AppRiver.
Zix is a long-time client of Baker Botts’ McDermett, who advised the company on its acquisitions of Erado and Greenview Data Inc. as well as the defense and settlement of a proxy fight launched by a 10 percent shareholder. The firm also represented Zix on a patent infringement litigation in the Eastern and Northern Districts of Texas with Echoworx concerning data encryption technology.
Zix’s purchase of AppRiver will be financed with a $175 million secured term loan provided by SunTrust and KeyBanc and a $100 million preferred equity investment in Zix being made by True Wind Capital, a San Francisco private equity firm that invests in the technology sector.
Jackson Walker advises Breck Partners on $100M debut fund
Breck Partners said it recently launched and is raising $100 million for its debut fund.
Cale McDowell, a partner with Jackson Walker’s Austin office, is counseling Breck.
The Dallas-based firm is led by Brad Brenneman and Brian Steinbrueck, who previously were partners at Wingate Partners. It plans to focus on investments in the paper/packaging, industrial services, auto/truck, building products, distribution/transportation/logistics and niche manufacturing industries.
Its hoped-for targets include companies with $50 million to $300 million in sales and strong market positions. It’s open to corporate carve-outs or divestitures and profitable as well as unprofitable businesses.
The team’s prior investments included Dunn Paper, which was sold to Arbor Investments in 2016; Industrial Container Services, which was sold to Aurora Capital in 2011 at a 70 percent return on investment; Nekoosa Coated Products, which was sold to Sentinel Capital in 2017; S&N Communications, which was sold to Sun Capital; and Sunrise Oilfield Supply.
Haynes & Boone, Jones Day advise on Alto’s $14.5M funding
Dallas on-demand ride startup Alto raised $14.5 million via two funding rounds from Road Ventures and Frog Ventures.
Haynes and Boone partner Eric Williams and counsel Bo Sartain represented Alto while Jones Day partner Alain Dermarkar represented Road Ventures.
Led by CEO Will Coleman and chief customer officer Alexandra Halbardier, Alto is focused on safety and hospitality, employing its own vetted and trained drivers and managing its own fleet of new, well-maintained SUVs. It’s a member-based service in which riders can control the in-car experience from the music to climate.
Alto said it plans to initiate another fundraising round this spring to fuel growth and expansion. It hopes to expand to more cities this year and reach the national level by 2020.
V&E advises Pensa on $5M in funding from Signia
Austin-based Pensa Systems said it raised $5 million in additional funding from a group led by Signia Venture Partners. It has raised $7.2 million in total.
New investor Commerce Ventures also participated along with existing investors ZX Ventures, ATX Seed Ventures, Capital Factory and Revtech Ventures. Signia partner Ed Cluss will join Pensa’s board of directors.
Vinson & Elkins partner Paul Tobias and counsel Wes Watts in Austin represented Pensa while Pillsbury counseled Signia out of San Francisco.
Pensa said it will use the funding to accelerate deployment of its system for inventory visibility to help eliminate out-of-stock items, which are estimated to be a trillion-dollar blind spot for the retail industry.
Led by CEO Richard Schwartz, Pensa claims to be the first company to deliver a broadly scalable system that automatically and systematically tracks in-store inventory using advanced computer vision, patent-pending artificial intelligence and autonomous drones to see and understand what’s on store shelves. The approach can help brands and retailers minimize “stockouts,” optimize product planning and increase revenue.
“Pensa is doing breakthrough work with AI and drones, bringing data to bear on a significant and costly problem for retail – the lack of consistent on-shelf inventory visibility,” Cluss said in a statement.
The company said it’s completed multiple successful live trials with major consumer brands and retailers, including beverage giant Anheuser-Busch InBev, which became a strategic investor through its unit ZX Ventures and is led by Patrick O’Riordan.
Pensa’s advisory board includes Tom Gruen, a pioneer in out-of-stock and category management analytics; Mick Mountz, founder and CEO of Kiva Systems, which pioneered the use of mobile robots for warehouse automation (it was acquired by Amazon); and researchers in robotics and machine learning from Carnegie Mellon University and University of Texas at Austin.
Egan Nelson advises MineralSoft on sale to Drillinginfo
Drillinginfo, an energy software-as-a-service and data analytics company in Austin, announced that it acquired mineral and royalty management software provider MineralSoft for undisclosed terms.
Egan Nelson partner Brian Alford and Jason Howard advised MineralSoft while Irell & Manella in California counseled Drillinginfo. Shawn Shillington is Drillinginfo’s in-house counsel in Austin.
Drillinginfo and MineralSoft began collaborating in 2017 to provide insights and analytics to understand the value of mineral and non-operated assets in real time.
Drillinginfo analysts believe oil and gas mineral interests in the U.S. generate more than $50 billion per year in income for nearly 12 million owners, but tools to access, monitor and effectively manage those interests are limited, with owners often suffering from limited information to value the assets.
“When it comes to minerals, there are thousands of operators, varying lease terms and fee structures, countless payments being made and audits to perform,” Drillinginfo CEO and president Jeff Hughes said in a statement. “Mineral interest owners want to know if they are being paid correctly, how commodity price changes will affect them and how their interests stack up compared to their neighbors or competitors.”
Hughes said what previously was a cottage industry of mineral buyers has turned into an important $1 trillion asset class with more players, greater sophistication and much more capital.
Led by CEO and co-founder Gabe Wilcox, MineralSoft works with more than 120 institutional clients and handles over $100 million in royalty and non-operated revenue monthly across 225,000 client-owned wells. Last year MineralSoft clients logged more than $1.3 billion in mineral acquisitions on the platform.
Drillinginfo recently acquired Oildex, the largest oil and gas financial automation software firm in North America, and announced its intent to acquire Cortex, a network-as-a-service company that enables automation of accounts payable and receivable processes for the oil and gas industry.
Kirkland aids Carlyle on Crimson Midstream investment
The Carlyle Group said Jan. 14 that it invested an undisclosed sum in Signal Hill, Calif.-based Crimson Midstream Holdings.
Kirkland & Ellis counseled Carlyle, including corporate partner Doug Bacon and associates Will Mabry, Chad Barton, Patrick Moneypenny and Gordon Cranner. All are in Houston except for Barton, who is in Dallas. Lewis, Bess, Williams & Weese in Denver counseled Crimson.
Crimson provides crude oil transportation and storage services in California, Louisiana and off the coast of the Gulf of Mexico. It operates more than 2,000 miles of pipeline in the U.S. transporting around 400,000 barrels of crude oil per day.
Crimson is developing the Swordfish Pipeline, which will use existing company assets to provide near-term connectivity for shippers between St. James and Raceland, La., to export markets via the Louisiana Offshore Oil Port terminal facility in Clovelly, La.
Crimson said the strategic partnership will help enhance its support of shippers on its pipeline systems and expand its presence in these regions and beyond as demand for U.S. crude export infrastructure increases.
Carlyle’s Global Infrastructure Opportunity Fund provided the equity for the investment.
Crimson is led by founder and CEO John Grier, who started Crimson Resource Management with a partner in 1986.
The U.S. added 1 million barrels a day of crude production last year and is producing a record 11 million barrels per day, according to the U.S. Department of Energy. And since the U.S. government lifted its ban on crude exports in 2015, crude export volume by U.S. producers has reached as high as 3 million barrels per day, according to U.S. Energy Information Administration estimates.
Experts say investment is required to accommodate new crude flows and ensure volumes have market access, including building new pipelines and export infrastructure and reversing existing pipelines.
Ferris Hussein – who previously oversaw acquisition strategy at Exxon Mobil –led the deal from Carlyle, which had $212 billion in assets under management across 339 investment vehicles as of Sept. 30.
Baker McKenzie aids Freeman, Encore Event on Encore’s sale to PSAV
Baker McKenzie said it counseled Dallas-based the Freeman Co. and Encore Event Technologies on Encore’s sale to the Blackstone Group-backed PSAV for an undisclosed sum.
The team was led by partners Jonathan Newton and Heath Trisdale in Houston. Other Texas lawyers who worked on the deal were tax partner Kai Kramer and associates Kevin Schott, Sarah Rosales and Ross Staine, all of Houston.
Simpson Thacher & Bartlett represented Schiller Park, Ill.-based PSAV out of New York.
JP Morgan provided financial advice to Freeman and Encore.
Encore helps create high-impact meetings and live events for the hospitality industry, including as in-house partner to 460 resorts, hotels, casinos and conference centers in North America and the Asia Pacific.
Joe Popolo is CEO and part owner of Freeman and Ken Sanders is chief development officer. Peter Wallace, David Kestnbaum and Bill Stein led the deal from Blackstone.
Bracewell Represents PreCheck in sale to Cisive
Bracewell said it represented Houston-based PreCheck Inc. on its sale to background screening services provider Cisive for undisclosed terms.
The team included partners Will Anderson, Jeffrey B. Andrews, Scott C. Sanders and Rebecca L. Baker in Houston, counsel C. Robert Baird in Dallas and associates Benjamin J. Martin, Jonathan G. Bates and Jackie Z. Coleman in Houston.
Willkie Farr & Gallagher in New York represented Cisive.
Stifel, Nicolaus & Co. provided financial advice to PreCheck.
Founded in 1983 and led by president Zach Daigle, PreCheck provides employment screening, compliance monitoring and credentialing solutions to the healthcare industry. It serves 4,000 hospitals, long-term care facilities, clinics, educational institutions and other ancillary healthcare organizations across the U.S.
Cisive CEO and president James Owens said the acquisition expands the company’s expertise in the healthcare industry and enhances PreCheck’s ability to advance in the global healthcare market.
Jackson Walker, Singer & Levick aid on Satori’s investment in Able Machinery
Satori Capital said it invested in Able Machinery Movers Inc., a Grapevine-based heavy machinery-moving and rigging company. Terms weren’t disclosed.
Mario Perez Dolan of Jackson Walker advised Satori Capital and Gregory Singer of Singer & Levick assisted Able Machinery.
Able is a 60-year-old heavy machinery-moving and rigging company that serves customers in the manufacturing, medical, semiconductor and food and beverage industries. Its customers include Bell Helicopter, General Electric, TDIndustries, Tetra Pak and Texas Instruments. The company is led by 30-year veteran David Krieger.
Satori Capital is a Dallas/Fort Worth-based multi-strategy investment firm founded upon the principles of conscious capitalism. It partners with leadership teams of companies with $5 million to $25 million of EBITDA that operate with a long-term perspective, commit to their mission or purpose and create value for all stakeholders.
Satori’s co-founder is Sunny Vanderbeck, who will soon come out with a book, “Selling Without Selling Out: How to Sell Your Business Without Selling Your Soul.”
Wilkins aids Z Option on sale to Audax’s Magnitude Software
Magnitude Software Inc., which is backed by Audax Private Equity, acquired Lewisville-based Z Option, a provider of Excel-based tools for SAP data management. Terms weren’t disclosed.
Lee Wilkins and Chris Elam of the Wilkins Law Group in Dallas represented Z Option’s sellers while Fredrikson & Byron in Minneapolis assisted Magnitude.
Austin-based Magnitude said the acquisition is its fourth in a little over a year and eighth overall and broadens its position in SAP industry.
Magnitude CEO Chris Ney said in a statement that Z Option shares a similar mission: to improve customer return on SAP investments by delivering efficient execution of common SAP functions directly from Microsoft Excel, making Z Option an ideal complement to Magnitude’s Unified Application Data Management product family.
Magnitude claims it’s tripled its recurring revenue, profit and global team over three years.
Led by Jim Halepaska, Lewisville-based Z Option said it’s provided software solutions to Royal Dutch Shell, Rio Tinto and Kraft Foods.
Dorsey advises Lance Armstrong’s Next Ventures on formation
Former Olympic cyclist Lance Armstrong has formed a new venture capital firm called Next Ventures in Austin with former investment banker and private equity advisor Lionel Conacher.
Dorsey & Whitney partner is Gina Betts in Dallas counseled the firm on its formation.
Conacher co-founded Westwind Partners Inc., a specialized Canadian institutional investment bank that grew to $100 million in revenues in five years before agreeing to a $145 million buyout by Thomas Weisel Partners. Conacher served as president of TWP until its sale to Stifel Financial in 2010.
In 2011, Conacher joined Altamont Capital Partners as a senior advisor, serving as chairman of Altamont investment Wunderlich Securities from 2013 until 2017. He is on the board of two Altamont companies: Dakine, a designer and maker of sportswear and sports equipment for the snowboard, ski, surf, skate, bike, kite and wind communities; and Mervin Manufacturing, a designer and maker of snow boards and other board sports equipment.
CAPITAL MARKETS
HuntonAK, Latham work on $500M Magellan notes offering
Hunton Andrews Kurth said Jan. 18 it represented the underwriters on Magellan Midstream Partners’ $500 million notes offering.
The Texas team members included Jordan Hirsch, Mike O’Leary, Tom Ford, Robert McNamara, O’Banion Williams, Lisa Shelton, Mike Hoffman, Oliver Fankhauser, Amanda Thienpont and Erin Kaufman. They had assistance from an attorney in the firm’s Washington, D.C., office.
Latham & Watkins counseled Magellan, including partner Ryan Maierson and associates Kevin Richardson, Clayton Heery and Drew Tengler-West.
The offering, which closed Jan. 18, involved 4.850 percent senior notes due 2049.The lead underwriters were J.P. Morgan Securities; Mizuho Securities USA; RBC Capital Markets; SMBC Nikko Securities America; and U.S. Bancorp Investments.
V&E advises New Fortress Energy on proposed IPO
Fortress Investment-backed New Fortress Energy plans to raise $400 million in an initial public offering of 22.2 million shares priced between $17 to $19, according to a filing with the Securities and Exchange Commission.
New York-based New Fortress plans to list on the Nasdaq under the ticker symbol NFE. Morgan Stanley, Barclays, Citi and Credit Suisse are the underwriters.
Vinson & Elkins partners David P. Oelman and E. Ramey Layne and counsel James R. Brown are advising New Fortress while Skadden, Arps, Slate, Meagher & Flom attorneys in New York are assisting the underwriters.
Despite the SEC running with limited staff because of the government shutdown, New Fortress is tentatively slated to make its debut on the Nasdaq later this week, CNN reported.
The company was founded by Wes Edens, co-CEO of Fortress Investment and co-owner of the NBA’s Milwaukee Bucks. It provides energy and logistical services to end users seeking to convert their operating assets from diesel or heavy fuel oil to liquefied natural gas. It has liquefaction and regasification operations in the U.S. and Jamaica.
New Fortress posted a net loss of $43.4 million in the first nine months of 2018, twice as much as in the same period in 2017, with sales of $80.9 million, up 12.4 percent over the previous period. The company had $121.9 million in debt.
The company plans to use the proceeds to complete the construction of its Old Harbour Terminal, its CHP Plant, its La Paz Terminal and its San Juan Facility. The rest will be used for potential development of additional liquefiers and downstream facilities.
The underwriters have an option to purchase more Class A shares, which could bring in another $56.5 million.
Baker Botts represents underwriters on DCP’s $325M notes offering
Baker Botts said Jan. 17 that it represented the underwriters on DCP Midstream’s upsized offering of $325 million in 5.375 percent senior notes due 2025.
The deal included partners Josh Davidson and A.J. Ericksen, senior associate Eileen Boyce and associates Katie Belleville and Steven Lackey. Special counsel Chuck Campbell assisted on tax matters.
Holland & Hart counseled the partnership.
The notes, issued by unit DCP Midstream Operating, will be fully and unconditionally guaranteed by the partnership. It plans to use the net proceeds to fund capital expenditures and repay debt under its revolver.
The lead underwriters included Mizuho Securities USA, Barclays Capital Inc., SunTrust Robinson Humphrey Inc., Citigroup Global Markets Inc., MUFG Securities Americas Inc. and TD Securities.
UPDATE:
Porter Hedges said Jan. 15 that it represented Houston-based Par Pacific on the financing of its $358 million acquisition of U.S. Oil & Refining Co. in Washington State. The Texas Lawbook reported the deal Dec. 4.
James Cowen and Joyce Soliman led the Porter Hedges team, which also included Brian Rose, Janine Lundin, Adam Nalley, Thomas Boyd, Sergio Gonzalez, Joe Laurel and Chase Boswell. Additional assistance was provided by Nick Nicholas, Jackie Moy, James Reardon, Jason Canaras and Emily Ashby.
As The Lawbook reported, Vinson & Elkins represented U.S. Oil’s backer Riverstone Holdings and Bracewell assisted Par Pacific.
As part of the Jan. 14 closing, Par Pacific entered into a $250 million senior secured term loan facility and a $45 million term loan agreement, the net proceeds of which were used to pay part of the purchase price. The company also amended U.S. Oil’s structured financing arrangement regarding its crude oil and refined products inventories and accounts receivable.
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Two other interesting transactions popped up last week, but neither of them involved Texas lawyers.
Austin private equity firm Tritium Partners raised $465 million for its second venture fund – surpassing its 2015 inaugural fund by 50 percent – but used Weil, Gotshal & Manges lawyers in New York. And San Francisco-to-Austin transplant Outdoorsy, which helps RV owners rent their vehicles when they’re not using them, attracted $50 million in a Series C round from investors led by Greenspring Associates.
Outdoorsy’s legal counsel was Braun Hagey & Borden in San Francisco. However, the firm’s managing partner Noah Hagey is from Austin and graduated from the University of Texas School of Law. Go horns!