
The combined company will be headquartered in The Woodlands, Texas, and will have operations in over 55 countries. (Source: Apergy Corp.)
[Editor's note: This story was updated at 4:54 p.m. Dec. 19. An earlier version incorrectly said the combined company would be named ChampionX.]
Apergy Corp. agreed to combine with Ecolab Inc.’s upstream business in a transaction valued at $4.4 billion, including the assumption of debt, the companies said in a joint release on Dec. 19.
The merger combines Apergy with Ecolab’s Nalco Champion business, which was renamed ChampionX and consists of drilling, completion, and energy production, chemistry sciences and solutions operations. The combined business is expected to generate pro forma revenue of about $3.5 billion with annual run-rate cost synergies of $75 million.
As part of the transaction, Apergy will issue 127 million shares to existing Ecolab shareholders. The deal is worth $3.89 billion based on Apergy’s closing price on Dec. 18. Apergy also will assume $492 million in debt from the acquisition, which brings the deal’s total value to about $4.4 billion.
Analysts with Tudor, Pickering, Holt & Co. (TPH) said the deal might not be cheap at first blush, but “we’re fans of the combo given burly production exposure.”
“Given the manufacturing nature of both entities, we expect the combined company will remain capex light and free cash flow generative, two items we hunt for within the OFS stock backdrop,” TPH analysts wrote in a Dec. 19 research note.
The analysts added they believe that Nalco’s production chemicals heavy revenue stream will further insulate Apergy shareholders from volatility inherent in oil and gas—“i.e. not a D&C-spend-driven business.”
Existing Apergy shareholders are expected to own 38% of the combined entity with Ecolab shareholders holding the remaining 62%.
Sivasankaran “Soma” Somasundaram, president and CEO of Apergy, said the tax-free transaction will create a scaled, global leader in production-optimization solutions.
“The ChampionX business is a ‘top box’ performer within our value creation framework, and will accelerate our strategic goals of broadening our product portfolio and geographic footprint, as well as expanding our customer relationships,” Somasundaram said in a statement.
He added that combined, the company will have a patent portfolio of over 2,400 global patents and an employee base of over 8,000 employees around the world.
Somasundaram will serve as president and CEO of the combined company. Jay Nutt, current CFO of Apergy, will serve as the company’s CFO with Deric Bryant, current executive vice president and president of Ecolab’s upstream energy business, as its COO.
The combined company will be headquartered in The Woodlands, Texas—where Apergy is currently based—and will have operations in over 55 countries.
The size of the Apergy board will be increased and two new directors designated by Ecolab will be appointed to the board. Daniel Rabun, current chairman of Apergy, will serve as chairman of the combined company.
The transaction is expected to be completed by the end of the second quarter of 2020, the release said.
Centerview Partners LLC and Lazard are financial advisers to Apergy for the transaction and Weil, Gotshal & Manges LLP is the company’s legal counsel. BofA Securities is financial adviser to Ecolab, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as its legal counsel.
Recommended Reading
E&P Highlights: March 20, 2023
2023-03-20 - Here’s a roundup of the latest E&P headlines, including a Black Sea discovery and new contract awards in the upstream oil and gas industry.
US Drillers Add the Most Gas Rigs in a Week Since December 2018: Baker Hughes
2023-03-17 - Oil rigs fell one to 589 this week, while gas rigs rose nine to 162.
Oxy CEO Vicki Hollub Talks Technology, Carbon Management
2023-03-17 - Technology partnerships key to bringing direct air capture facilities to reality.
Eni’s Yatzil Well Hits in Mexican GoM
2023-03-17 - Eni’s Yatzil well found 130 ft of pay, and the operator estimates 200 MMboe reserves in place.
Seismic Programs Awarded Offshore Brazil
2023-01-04 - A 3D survey extends coverage in the Brazil Equatorial Margin, while a pair of 4D surveys are set for some of Petrobras’ Campos Basin fields.