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Apergy Wins Shareholders Nod for ChampionX Merger
Friday 29 May 2020

Shareholders of US-based oilfield equipment maker Apergy Corp. (NYSE: APY) have approved the issuance of shares of Apergy common stock in connection with the pending combination of the ChampionX business with Apergy through a merger of Athena Merger Sub, Inc., a wholly owned subsidiary of Apergy, with ChampionX Holding Inc., a wholly owned subsidiary of Minnesota, US-based Ecolab Inc Ecolab Inc, the company said.

Last December, Minnesota, US-based Ecolab Inc., a water, hygiene and energy technologies and services company, agreed to separate the Upstream Energy business of Nalco Champion (renamed ChampionX) and combine it with Texas, US-based Apergy Corp. (NYSE: APY) to scale production-optimisation solutions, the company said.

The transaction will be effected through a Reverse Morris Trust transaction pursuant to which ChampionX is expected to be spun-off to Ecolab's shareholders and simultaneously merged with and surviving as a wholly-owned subsidiary of Apergy.

At the completion of the transaction, Apergy will issue approximately 127m shares on a fully diluted basis to existing Ecolab shareholders and assume estimated net debt of approximately USD 492m.

Based on Apergy's closing price of USD 30.67 on December 18, 2019, the transaction values Ecolab's ChampionX business at USD 4.4bn, which represents approximately 12.5x 2019 estimated EBITDA, and approximately 10.3x 2019 estimated EBITDA including full-run rate cost synergies; as well as less than 9.5x 2020 estimated EBITDA including full run-rate cost synergies.

Existing Ecolab shareholders will own approximately 62% of the Combined company on a fully diluted basis, with existing shareholders of Apergy owning approximately 38% of the Combined company on a fully diluted basis.

Both sets of shareholders will jointly participate in the expected synergies and other benefits of the combination.

ChampionX and Bank of America executed a term loan facility commitment letter pursuant to which Bank of America has committed to provide a term loan financing, subject to customary conditions, to ChampionX for approximately USD 537m to fund a net cash payment of approximately USD 492m to Ecolab.

At closing, ChampionX is expected to have approximately USD 45m of cash. Apergy has also obtained fully underwritten commitments to amend its existing debt facilities and guarantee the ChampionX debt to permit the transaction.

The tax-free transaction combines Apergy with Ecolab's ChampionX business, which is expected to generate approximately USD 2.4bn in revenue in 2019, and consists of the drilling, completion, and energy production, chemistry sciences, and solutions operations currently included within Ecolab's Energy segment.

The downstream chemistry solutions business from Ecolab's former Energy segment will be retained by Ecolab.

Following the completion of the transaction, the Combined company will have approximately USD 3.5bn in pro forma 2019 sales, with a strong balance sheet and robust free cash flow generation.

Apergy is a provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world.

Ecolab is a leader in water, hygiene and energy technologies and services that protect people and vital resources.

The merger is expected to be completed in 2Q20, subject to remaining closing conditions.

Following the closing of the merger, Apergy plans to change the name of the combined company to ChampionX Corp. and to change its ticker symbol to CHX.

Apergy is a provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world.

Centerview Partners LLC and Lazard are serving as financial advisors to Apergy and Weil, Gotshal and Manges LLP is serving as legal counsel. BofA Securities is serving as exclusive financial advisor to Ecolab, and Skadden, Arps, Slate, Meagher and Flom LLP is serving as legal counsel.
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Date Published: 29/05/2020

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