Total Energy Services Inc. signs agreement to acquire process equipment fabrication business
Tuesday, Dec 18, 2012Total Energy Services Inc. (TSX:TOT) ("Total" or the "Corporation") is pleased to announce that it has entered into a letter agreement (the "Letter Agreement") with an arm's length third party (the "Vendor") to acquire substantially all of the assets related to the process equipment fabrication business (the "Purchased Business") currently conducted by the Vendor for $14.0 million plus the value of inventory on hand at closing which is currently estimated to be approximately $3.0 million (the "Acquisition"). Total intends to finance the Acquisition with cash on hand.
The Purchased Business is a well-established business located in Calgary, Alberta that manufactures oil and natural gas process equipment for sale in Canada and internationally. The Purchased Business employs approximately 100 people and is expected to generate approximately $3.5 million of EBITDA for 2012 on sales exceeding $30 million.
The assets related to the Purchased Business to be acquired by Total include a 65,000 square foot fabrication facility located on 8 acres of land, shop tools and equipment, inventory, furniture and fixtures, assignable contracts and other assets currently used in the conduct of the Purchased Business. The Corporation expects to combine the assets of the Purchased Business with Total's existing process equipment fabrication business, Spectrum Process Systems Inc. ("Spectrum"). Spectrum has entered into employment contracts, conditional on completion of the Acquisition, with substantially all of the employees of the Purchased Business, including the senior management team.
Total has completed due diligence investigations in respect of the Acquisition and the Board of Directors of the Corporation has approved the Acquisition. Completion of the Acquisition remains subject to satisfaction of a number of customary conditions in favor of Total, including receipt of all necessary third-party consents and approvals, execution and delivery of a formal agreement of purchase and sale, conduct of the Purchased Business in the ordinary course until closing of the Acquisition and the execution and delivery of non-competition agreements by the Vendor and its parent corporation. The Letter Agreement also provides for various conditions in favor of the Vendor, including receipt of all necessary third-party consents and approvals and the execution and delivery of a formal agreement of purchase and sale. The Letter Agreement provides that Total and the Vendor will use reasonable efforts to complete the Acquisition with effect as of January 1, 2013.
When completed, the Acquisition is expected to significantly increase Total's presence in the process equipment fabrication business. In October 2012, Spectum took possession of a newly constructed 20,000 square foot manufacturing facility which is located in close proximity to the facility to be acquired pursuant to the Acquisition. The Purchased Business will increase Spectrum's fabrication capacity and provide Spectrum with experienced personnel and a well-established market presence both domestically and internationally.
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