THE WOODLANDS, Texas, July 20, 2014 /PRNewswire/ -- TETRA Technologies, Inc. (TETRA or the Company) (NYSE:TTI) today announced that its majority owned, publicly-traded partnership, Compressco Partners, L.P. (Compressco or the Partnership), 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 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. Stuart Brightman, TETRA's President and Chief Executive Officer, and Chairman of the Board of Compressco, commented, "This acquisition is the next step in a series of strategic moves to position TETRA to generate improved and more predictable earnings and cash flows. We are excited to acquire a company with such a strong reputation in the industry, a diverse product offering, a solid management team, and a robust customer base. In addition, we believe that this acquisition will allow TETRA to significantly increase our cash flow from Compressco. I am extremely pleased to announce this strategic acquisition. We expect to create synergies of between $5 million and $10 million on an annualized basis, beginning in 2015. "Looking forward, the combined organization will be led by Tim Knox, CSI's current President. Ron Foster will take on the role of Senior Vice President and Chief Marketing Officer, and James Rounsavall will serve as Chief Financial Officer. We believe that this blending of the current CSI and Compressco leadership will provide continuity for both organizations, while retaining valuable institutional knowledge and industry experience. When we have completed this acquisition, the combined management teams across TETRA, Compressco and CSI will be managing a world-class global enterprise that will create value for both TETRA and Compressco shareholders." Mr. Brightman continued, "Based on a number of specific assumptions, we understand that Compressco management expects to be able to recommend to its Board of Directors a 12-14% increase in the cash distribution per outstanding common unit attributable to the quarter ending December 31, 2014 (the first full quarter following the acquisition), compared to the $0.4525 distribution per outstanding unit, or $1.81 per outstanding unit on an annualized basis, attributable to quarter ended June 30, 2014. To meet the strong demand for compression services, following the acquisition, we expect to grow capital expenditures to between $90 and $100 million in 2015, which will provide incremental revenues and is expected to facilitate additional increases in cash distributions. Compressco currently expects to generally maintain a coverage ratio of 1.2 times distributable cash flow to distributions, consistent with our past practices." Following the transaction, it is currently expected that TETRA's ownership of the Partnership will be reduced to approximately 46%. TETRA will maintain 100% ownership of the Partnership's general partner, and will continue to consolidate the results of Compressco in its financial statements.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV