Merger and acquisition activity in the energy, mining and utility industries worldwide has been brisk, at least on a value basis.
According to a recent report by Mergermarket, those three sectors together produced 680 deals worth $341.1 billion in the first half of the year. It marked the lowest deal count since the same period in 2015 (657 deals), but the highest deal value since 2007 ($347.2 billion).
That means bigger deals are ruling the day. Indeed, average deal value for the three combined sectors was $711 million, the second highest on record for Mergermarket (since 2001).
The data provider notes that cross-border appetite for energy assets, particularly among Chinese investors, is on the rise; and interest in renewable energy assets like wind and solar is growing.
The U.S. appears to be focused on domestic consolidation, however. M&A in the three sectors reached 184 deals in the first half valued at $134.4 billion – the highest deal value and the third-highest deal count for domestic deals on record, Mergermarket says.
The largest domestic deal in the period was Marathon Petroleum Corp.’s agreement to purchase fellow oil refiner Andeavor for $31.3 billion. Alas, neither company used outside lawyers from Texas on the transaction, although Andeavor’s general counsel Kim K.W. Rucker is based in San Antonio, the company’s headquarters.
Deal activity among Texas lawyers last week was dominated by transactions in the energy sector, from exploration and production assets changing hands to the continued consolidation of the oilfield services industry.
In addition, an oilfield services-focused private equity firm announced its first fund closing and another oil and gas company filed to go public. Some industrial deals also made it across the finish line.
In all, there were 13 deals worth $2.13 billion involving 15 law firms and 60 Texas lawyers, versus 14 deals worth $5.37 billion handled by 17 firms and 98 Texas lawyers the previous week. The lower value is not too surprising for the middle of summer, when the dealmaking business typically slows down.
V&E, Winston, Bracewell aid on $588M Matlin, USWS combo
Vinson & Elkins said July 16 it advised Crestview Partners in relation to Matlin & Partners Acquisition Corp.’s proposed merger with U.S. Well Services, which will become an publicly traded company with an expected enterprise value of $588 million.
Funds managed by Crestview and other investors committed to a $135 million private investment in public equity, or PIPE, in the combined company at $10 per share.
The V&E team was led by partners James Garrett and Ramey Layne. Assisting were partners Lina Dimachkieh on tax, Steve Borgman on intellectual property, Larry Nettles on environmental, Stephen Jacobson on executive compensation/benefits and Sean Becker on labor/employment. Senior associate Crosby Scofield and associate Jane Ehinmoro helped from the corporate side.
Winston & Strawn counseled U.S. Well Services, including partner Chris Ferazzi, oil and gas counsel Alex Niebruegge and associate Anna Gryska. They had help from attorneys in the firm’s New York and Chicago offices.
Bracewell said July 18 it represented Matlin. The team included partners Charles H. Still Jr., Rebecca L. Baker, Scott C. Sanders, Constance Gall Rhebergen, Timothy A. Wilkins and Bruce R. Jocz. Other members of the team were associates David A. Bartz, Andrew W. Monk and Jay N. Larry and attorneys in the firm’s New York office.
Matlin received financial advice from Cantor Fitzgerald & Co. while U.S. Well Services used Piper Jaffray & Co.
The deal, which was announced July 15, is expected to close in the fourth quarter if it clears Matlin shareholders. The company will continue to be led by CEO Joel Broussard and TCW Group managing director Kyle O’Neill is joining the company as CFO. Current CFO Matt Bernard will become chief administrative officer and Nathan Houston will continue as COO.
The board of directors will include Broussard, two members from Matlin, two members from U.S. Well Services and two members from Crestview.
Matlin is a special purpose acquisition company, or SPAC, also known as a “blank check” company. It’s led by distressed investor David Matlin.
U.S. Well Services, known as USWS, is a technology-oriented oilfield service company focused exclusively on hydraulic fracturing services for the oil and gas industry. Its fracking fleets are powered with electricity rather than traditional diesel fuel.
The company plans to use the new investments to expand its fleet from 11 to 17, making it one of the bigger players in the industry. Its peers include C&J Energy Services, FTS International, Keane Group Inc., Liberty Oilfield Services, ProPetro Holding Corp. and RPC Inc.
Analysts at Tudor, Pickering, Holt said they are big fans of USWS management’s entrepreneurial endeavors and think that the “e-frac” technology will increase in market share given the potential value proposition. But they said they’re not “super sanguine” on the decision to speed up frac fleet additions into a market they believe is already oversupplied.
First Reserve buys Dresser NGS from Baker Hughes for $375M
First Reserve said July 18 it bought Dresser Natural Gas Solutions from Baker Hughes, which is partly owned by General Electric.
The private equity firm didn’t disclose terms, but Baker Hughes said the price amounted to $375 million.
Simpson Thacher Bartlett represented Stamford, Conn.-based First Reserve out of New York while Jones Day assisted BHGE out of Atlanta.
Baker Hughes’ chief legal officer is Will Marsh. He joined the Houston-based company in 2006, working his way up from director of enterprise risk strategies to VP of legal for the western hemisphere to VP and general counsel to chief legal counsel in July of last year.
The Brigham Young-trained lawyer previously was a partner at Ballard Spahr.
Dresser NGS, as it’s known, makes commercial and industrial natural gas meters and pipeline repair products. It employs 450 employees around the world.
Baker Hughes also is selling a Italian manufacturing plant with about 40 workers to Pietro Fiorentini.
Both deals are expected to close before year-end.
First Reserve previously owned the business for 10 years when it was part of Dresser Inc., which First Reserve sold to GE in 2011 for $3 billion.
Baker Hughes CEO Lorenzo Simonelli said in a statement that the company received good value for the units, which weren’t core parts of Baker Hughes’ business, and that it will continue to evaluate its portfolio for other divestitures.
Jeff Quake, a managing director at First Reserve, said the investment is a continuation of the firm’s focus on investments targeting the asset integrity sector.
First Reserve has raised $31 billion in capital since inception and completed 650 transactions.
Weil, Baker Botts, Jones Walker aid on Tidewater’s Gulfmark deal
Weil Gotshal Manges said July 16 that it counseled Houston-based Tidewater Inc. on its $340 million purchase of crosstown rival GulfMark Offshore Inc., the latest deal in the consolidating oilfield services sector.
The Weil team included partner James Griffin, associate Anne Langford and tax partner Jonathan Macke, all of Dallas. Attorneys from the firm’s Silicon Valley, New York and Washington, D.C. offices assisted.
Lawyers mostly in Jones Walker’s New Orleans and Baton Rouge offices also advised Tidewater, but environmental partner Michael Chernekoff in Houston pitched in.
Gibson Dunn lawyers in New York counseled GulfMark, which used Evercore as its financial adviser.
Baker Botts represented Lazard, which was Tidewater’s financial adviser. The team included corporate partners Joshua Davidson and A.J. Ericksen and associate Leslie Daniel, all of Houston. The Lazard bankers included Doug Fordyce, Andrew Chang and Pablo Hernandez.
Tidewater’s general counsel is Bruce Lundstrom, a Northwestern-educated lawyer who has been with the company since 2007. Before that he was senior vice president and general counsel of Prisma Energy International Inc., which previously was part of Enron Corp. before it went bankrupt and was liquidated.
The parties claim the merger will create a global offshore support vessel leader positioned to capitalize on cost synergies estimated at $30 million in 2019 and growth opportunities as the recovery of the offshore support vessel sector gains traction.
The deal expands Tidewater in the U.K. part of the North Sea basin, which has been active given higher oil prices.
GulfMark stockholders will receive 1.100 shares of Tidewater common stock for each of their shares. GulfMark securityholders will end up owning 27 percent of the combined company, whose equity market capitalization is expected to be around $1.25 billion.
At closing, $100 million worth of GulfMark debt is expected to be repaid, allowing Tidewater to maintain what it calls its industry-leading position of financial strength with $100 million in net debt and $300 million in available liquidity.
Tidewater will assume GulfMark’s obligations under existing GulfMark equity warrants.
Tidewater CEO John Rynd will lead the combined companies and its board will be expanded to 10 seats by adding three directors selected by GulfMark.
The transaction is expected to close in the fourth quarter if it clears the stockholders of both companies.
Analysts at Seaport Global Securities said in a note that the deal signified the beginning of consolidation in the long suffering offshore part of the oilfield services sector. They said that other drillers should take note of the move as a way to cut excess capacity in the marketplace and exert some measure of pricing leadership.
Gibson Dunn advises Black Bay on $224M maiden fund
Energy-centric Black Bay Energy Capital raised $224 million for its maiden fund and Texas lawyers from Gibson Dunn handled the tax aspects.
The team included partner David Sinak and associate Mike Cannon in Dallas. The rest of the Gibson team was located outside of Texas.
The New Orleans-based fund beat its $200 million target. Its investors included endowments, foundations, private pensions, fund of funds and family offices. Probitas Partners was its placement agent.
Founded in 2016, Black Bay said it invests in companies led by entrepreneurs offering proven, next-generation products and services that help improve the economics, efficiency and safety of oilfield operations.
The firm is led by managing partner Michael LeBourgeois, who previously was managing director at NGP Energy Technology Partners for almost 10 years.
Black Bay partner Tom Ambrose said the firm already has backed six management teams. Its portfolio companies include ADS Services, Clean Chemistry, Dynamic Chemical Solutions and SCS Technologies.
Other founding members of the Black Bay team include senior associate Matt Schovee and CFO Julie Isacks.
Sidley aids ICD on $200M purchase of Avista-backed Sidewinder
Sidley Austin advised Independence Contract Drilling on its $200 million purchase of Avista Capital-backed Sidewinder, according to documents filed with the Securities and Exchange Commission.
Partner David Buck, who joined Sidley from Andrews Kurth last year, was the lead lawyer on the deal.
Attorneys at Morgan Lewis in New York, Hartford, Connecticut and Boston assisted Sidewinder.
Evercore provided financial advice to Independence on the transaction. Latham & Watkins counseled Evercore, including partners Ryan Maierson and David Miller.
Houston-based Independence, known as ICD, announced the deal July 19. It anticipates it to close early in the fourth quarter.
The transaction is expected to more than double the size of ICD’s pad-optimal rig fleet.
Sidewinder unitholders will receive 36.75 million ICD shares valued at $148.85 million. Affiliates of MSD Partners hold the largest stake and will keep about 31 percent of the combined company.
ICD also will assume an estimated $50 million in Sidewinder’s debt.
At closing, ICD will enter into a $130 million, secured, five-year-non-amortizing term loan and a $40 million revolving credit facility. The proceeds from the term loan will be used to refinance ICD’s and Sidewinder’s debt.
Sidewinder CEO and president Anthony Gallegos will lead the combined company, succeeding ICD CEO Byron Dunn, along with ICD CFO Philip Choyce.
The combination’s board will include Gallegos, four current ICD board members, including chairman Thomas Bates, and two members appointed by Sidewinder’s controlling owners.
ICD said it expects to strengthen its cash flows and balance sheet, add operational expertise and capabilities and create opportunities to market additional rigs into its expanding customer base.
The company aims to double its pad-optimal fleet to 34 rigs by the end of 2019 and synergies to reach $8 million per year. The combination’s operations will be focused on the Permian, Haynesville and other basins in Texas and neighboring states.
RBC Capital Markets analyst Kurt Hallead was positive on the transaction, saying the combined company is expected to generate more than $1.20 per share in EBITDA next year, including synergies. He said ICD’s 34 pad-optimal rigs should put it among the top five players in the U.S.
The transaction has to clear regulators and ICD’s stockholders but is expected to close early in the fourth quarter.
ICD provides land-based contract drilling services for oil and natural gas producers in the U.S.
Sidewinder was formed in 2011 by its management team and Avista to build, own and operate premium land drilling rigs and provide contract drilling services to exploration and production companies targeting North American unconventional resource plays.
Sidley, Latham working on $100M Remora Royalties IPO
Texas lawyers are working on yet another planned initial public offering in the oil and gas sector.
Sidley Austin is advising NGP Energy Capital Management-backed Remora Royalties Inc. on its hoped-for debut, which registered with the Securities and Exchange Commission with a $100 million placeholder. The team is led by partners George Vlahakos and Jon Daly, who both joined the firm from Andrews Kurth last year.
Latham & Watkins partners Ryan Maierson and John Greer in Houston are assisting the underwriters, which include RBC Capital Markets, Wells Fargo and UBS.
Austin-based Remora plans to list on the Nasdaq under the symbol RRI.
Led by CEO George Peyton, the company owns stakes in 3,600 gross producing wells in 12 states and 13 onshore basins, mostly in the Midcontinent, South Texas/Gulf Coast, East Texas/North Louisiana and Permian. It generated sales of $36.1 million last year.
T&K aids Tailwater-backed Pivotal on divestiture to Northern Oil
Thompson & Knight said July 19 it advised Tailwater Capital-backed Pivotal Petroleum Partners on its sale of producing wells in North Dakota to publicly traded Northern Oil and Gas Inc. for $151.83 million.
The deal team was led by partner Robert Dougherty and included partners Kenn Webb, Holt Foster, Dean Hinderliter and Brandon Bloom and associates Mitchell Griffith and Marc Lombardi,
Faigre Baker Daniels assisted Northern Oil and Gas.
The deal includes $68.4 million in cash and 25.75 million shares of Northern stock recently worth $83.43 million.
Pivotal will be subject to a lock-up on the shares over a 13-month post-closing period. The deal includes a mechanism for potential additional consideration to be paid during the lock-up period if Northern’s stock trades below certain price targets.
The acquisition is expected to close in 60 days.
The properties produce 4,100 barrels of oil equivalent per day. Northern expects the acquisition to generate $56 million in cash flow over the next year and improve leverage metrics and earnings per share through 2020.
Northern founder and president Mike Reger said the properties, which are in the core of the Williston Basin, are transformative for the company, with strong free cash flow and a high rate of return. The company expects to be cash flow positive once the deal closes with below-peer debt metrics next year.
Northern already owns properties in the Williston Basin Bakken as well as the Three Forks play in North Dakota and Montana.
Dallas-based Tailwater Capital has executed 65 energy transactions in the upstream and midstream sectors representing $16.6 billion in transaction value. It currently manages $2.6 billion in committed capital, $800 million of which is available for new investments.
Willkie aids Capital Constellation on $150M partnership with Ara
Willkie Farr & Gallagher said July 17 it advised Capital Constellation on a $150 million strategic partnership with Ara Partners Group that will result in the former owning a minority interest in the latter.
Partner Michael De Voe Piazza in Houston led the Willkie team.
Kirkland & Ellis represented Ara affiliate Intervale, including partner Matthew Nadworny, associate Laura Stake and tax partner Steve Butler, all of Houston.
An attorney at Foley & Lardner in Boston counseled Ara, whose general counsel is in Boston.
Capital Constellation provides investment capital to next-generation investor entrepreneurs. It’s a joint venture formed by the Alaska Permanent Fund Corporation, RPMI Railpen and Wafra Inc. on behalf of the Public Institution for Social Security of Kuwait.
The firm launched earlier this year with $700 million in initial commitments from its founders and pans to deploy $1.5 billion to rising alternative managers, including Ara, over the next five years.
Ara invests in middle-market opportunities across the global energy and industrials sectors. Its affiliates include Intervale along with AEM Advisers, Bayou City Energy, Cibolo Energy Partners, Junction Energy Capital, Aksiom Partners and Teleios Commodities.
Ara’s predecessor Argus Energy Managers was started last year by Charles Cherington and Will McMullen, founder of Bayou City. It was rebranded last month to reflect its growth and future focus and manages $2.2 billion in committed capital. The fim is led by Cherington and Troy Thacker, the former CEO of Total Safety US Inc.
V&E counsels Swivel on $4.75M First Round funding
Swivel, an Austin-based provider of workspaces akin to WeWork, raised $4.75 million in seed funding from investors led by First Round Capital.
Other investors include Fuel Capital, Correlation Ventures, Great Oaks Venture Capital, Hack VC, Capital Factory and Abstract Ventures. Existing investors Floodgate and Next Coast Ventures also participated in the round.
Swivel said it plans to use the funds to make key hires, enhance its platform and expand into new cities.
Vinson & Elkins counseled Swivel, including partner Wes Jones and counsel Wes Watts in Austin.
Swivel’s co-founder and CEO is Scott Harmon, who incubated the company in 2016 under the name Poquito with backing from Floodgate co-founder Mike Maples. Harmon worked with Maples at software developer Motive Inc., which went public in 2004 and was sold to Alcatel-Lucent in 2008 for $67.8 million, and Tivoli Software, which went public in 1995 and was sold to IBM in 1996 for $750 million.
Last year Swivel attracted funding from Palo Alto-based Floodgate and Austin-based Next Coast Ventures to build the product and hired co-founders Tabrez Syed, David Proft, Wade Cohn and Greg Kattawar.
Swivel provides its services to companies that have moved beyond co-working but don’t want to commit to a long-term lease or build out their own office space. It currently lists 45 spaces in Austin.
The company works with tenant advisory firms and landlords to find office spaces, which feature short and no-hassle terms and the ability to move in quickly. Its partners include ECR, CBRE, HPI, Stream, Colliers International, Avison Young, Live Oak, Elevate Growth Partners, Aquila and Newmark Knight Frank.
San Francisco-based First Round Capital was an early investor in Square, Uber, healthcare technology and services company Flatiron Health and eyeglass retailer Warby Parker.
Akin Gump advises debt-laden UDG on sale to SunSource
Akin Gump said July 18 that it advised United Distribution Group Inc., or UDG, on its sale to Clayton, Dubilier & Rice-backed SunSource Holdings Inc. for an undisclosed sum.
Corporate partner Iain Wood, who offices out of Dallas as well as Washington, D.C., led the team. He was joined by lawyers in the firm’s New York and Washington offices.
Debevoise & Plimpton was SunSource’s outside legal adviser.
SunSource obtained committed financing for the transaction from financial adviser Barclays along with Credit Suisse and Deutsche Bank. Baird was UDG’s financial adviser.
Addison, Illinois-based SunSource is a distributor of fluid power and fluid process components and systems in the U.S. and Canada. Clayton, Dubilier & Rice bought the company last year from Littlejohn & Co. for an undisclosed sum.
UDG, which is headquartered in Bristol, Tennessee, is a distributor of fluid conveyance and related products and services primarily for maintenance, repair and operations in the energy, mining and other industrial end markets. Its units include GHX Industrial and United Central Industrial Supply.
Private equity firm American Securities Capital took a majority stake in the company in 2006. It transferred the company to its lenders in April.
S&P Global Ratings said in a note July 20 that if the acquisition closes and UDG’s debt is repaid, it would resolve UDG’s impending liquidity crisis and eliminate concerns that the company could potentially undergo a distressed exchange from its $236 million first-lien term loan due in October. S&P said the rest of the company’s capital structure comes due in April of next year, when its $180 million second-lien term loan matures.
However, if the transaction doesn’t close, S&P said the company’s capital structure would be vulnerable to nonpayment given its two upcoming maturities and could face a liquidity crisis and default without some form of refinancing, restructuring or distressed exchange of its upcoming maturities.
Kelly Hart aids Mustang Energy Services on sale to Extreme Plastics
Kelly Hart said July 19 it counseled family-owned Mustang Energy Services on its sale earlier this month to private equity-backed competitor Extreme Plastics Plus, known as EPP, for undisclosed terms.
The deal team included S. Benton Cantey, corporate partner and chair of the corporate and securities section; corporate associates Chelsea Wood and Nathan McCune; tax partner Tom Hegi; labor and employment partner Chris Howe; real estate partner Mark Bishop; and finance partner Matt Luensmann.
Holland & Knight partner Fred Stovall in Dallas represented the buyer.
The parties expect the merger will create one of the country’s largest environmental containment services companies. The combined company will serve exploration and production operators across Texas, New Mexico, Oklahoma, Pennsylvania, West Virginia, Ohio, Colorado and Wyoming.
To facilitate the merger, an affiliate of New York private equity firm Blue Wolf Capital Partners, which is a majority investor in EPP, acquired a majority interest in Mustang.
Mustang founders Todd and Whitney Creel are keeping a “significant” undisclosed interest in the combined company, which will be led by EPP CEO Wade Jay Minmier. Minmier previously was president of Nomac Drilling, whose parent Seventy Seven Energy was acquired by Patterson-UTI last year for $1.76 billion.
The combined company’s services include environmental liner systems and installations, above ground storage tanks, composite mats, secondary containment systems and floating covers.
BSN Sports acquires Irving-based sporting goods business
Dallas-based BSN Sports said July 17 it completed its acquisition of Teamline Ltd. for an undisclosed sum.
BSN chief legal officer Burton Brillhart worked on the deal along with K&L Gates counsel Carlos White and tax partner Sam Megally.
BSN is a unit of Varsity Brands and the country’s largest direct marketer and distributor of sporting goods to the school and league markets.
Charlesbank Capital Partners sold the company to Bain Capital Private Equity in June for a reported $2.5 billion, which, if accurate, would represent a $1 billion profit. That deal is expected to close this quarter.
Irving-based Teamline has been providing sporting goods equipment and apparel to team customers in the Dallas Metroplex since 1999. It was founded by Charles Anderson.
Teamline executives Craig Farmer, Brent Parker, Tim Stockard and Scott Mudd are staying on.
BSN president Terry Babilla said in a statement that the company has added 200 sales professionals in 14 states in the last 12 months.
Brillhart has been Varsity Brands’ chief legal officer, general counsel and chief of staff since 2015. Before that he was a member/equity partner at McGlinchey Stafford for five years.
Earlier in his legal career, the St. Mary’s University-trained lawyer was an equity partner at Godwin Gruber (now Godwin Bowman & Martinez), serving as chairman of its labor and employment section.
Gibson Dunn advises Aurora on acquisition of Inhance
Gibson, Dunn & Crutcher said July 20 that it represented Aurora Capital on its acquisition of Inhance Technologies from Arsenal Capital for an undisclosed sum.
The deal team was mostly in Los Angeles but did include Dallas partner Karl Nelson, who handled employment aspects.
Kirkland & Ellis was Arsenal’s and Inhance’s legal adviser with attorneys out of Chicago. Baird provided them with financial advice.
Houston-based Inhance focuses on transforming plastics and composites for higher performance.
Arsenal partnered with Inhance founders Monty Ballard and Bill Brown in 2012 and together they recruited an experienced management team, including former Arsenal operating director Andy Thompson as CEO. They sold the company’s technologies into new end markets, expanded its customer base and set up manufacturing in Brazil, Australia and Mexico to better serve its global customers.
New York-based Arsenal invests in middle-market specialty industrials and healthcare services companies, typically with enterprise values between $100 million and $500 million. Since inception, it’s raised $3 billion in institutional equity investment funds.