OKLAHOMA CITY, July 20, 2014 /PRNewswire/ -- Compressco Partners, L.P. (Compressco or the Partnership) (NASDAQ: GSJK) today announced that Compressco has entered into a definitive agreement to purchase all the outstanding shares of Compressor Systems, Inc. (CSI) for $825 million in cash, subject to working capital and other adjustments.
This acquisition is expected to increase Compressco's total horsepower offering from approximately 187,000 to over 1,045,000, and will allow Compressco to utilize an expanded range of compressor packages (from 20 HP units to 2,370 HP units) for compression services to customers. It is anticipated that this expansion of Compressco's service offerings will allow the Partnership to participate in the compression market at a broader level.
CSI, founded in 1971 and based in Midland, Texas, is the largest privately held, full service natural gas compression provider in the U.S. CSI fabricates, sells, and maintains natural gas compressors and provides compression services that cover the entire natural gas production and transportation cycle to a broad customer base. CSI owns one of the largest fleets of natural gas compression equipment in the United States, with over 275 units in the 1,000 horsepower and larger range. In addition, CSI fabricates and sells engine-driven oilfield fluid pump systems primarily for the international market.
For the twelve months ended March 31, 2014, CSI's aggregate revenues were $311 million, and EBITDA was $82.3 million.Compressco has obtained committed financing to complete the transaction, which is expected to close in early August. However, it is currently anticipated that financing will include Compressco's issuance of approximately $400 million of public equity and $350 million of publicly-rated senior notes, with the balance being drawn from a $400 million revolving credit facility. TETRA Technologies, Inc. (TETRA), the indirect 100% owner of Compressco's general partner, expects to purchase common units in the equity offering and make contributions to maintain its approximate 2% general partner interest in an aggregate amount of up to $40 million. Ronald J. Foster, President of Compressco Partners, remarked, "I am thrilled to announce the acquisition of CSI. The combined company will bring together two industry leaders, each with a strong reputation for "Best in Class" service, that will provide value-driven services for our customers, generate strong returns for unit holders, and continue to provide a safe, long-term work environment for employees. The acquisition will create a complementary portfolio of compressor units and services to address a wide range of applications targeting the oil, liquids and natural gas markets in both domestic and international areas." Mr. Foster continued, "Our stated strategy of "scale through growth" by pursuing parallel paths of organic growth and M&A opportunities is greatly advanced by this transformative transaction. We are excited to broaden our existing services to include production enhancement at the wellhead, vapor recovery at production facilities, gas-lift artificial lift in completion and production, and infrastructure compression for midstream and downstream customers. The combined management talent of the two companies will be a "game changer" in the compression industry, given the breadth of experience in all facets of providing world class customer service. Part of the strategic rationale for this transaction includes the creation of synergies of between $5 million and $10 million on an annualized basis beginning in 2015, from factors such as:
- critical mass and cash flow stability;
- complementary fleet and services including common infrastructure;
- broad range of compression service applications from 20HP – 2,370HP;
- increased market exposure through broad product offerings in shale basins;
- leveraged opportunities for geographic expansion in the U.S. and internationally; and
- significant manufacturing, engineering and technology opportunities.
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