Dril-Quip, Innovex Downhole Solutions merge to form “unique” oil and gas industrial platform

(WO) – Dril-Quip, Inc. and Innovex Downhole Solutions, Inc. announced a definitive agreement under which Dril-Quip and Innovex will merge in an all-stock transaction to create a unique energy industrial platform.

Upon closing of the transaction, Dril-Quip stockholders will own approximately 52% and Innovex stockholders will own approximately 48% of the combined company on a fully diluted basis.

The combination brings together the two companies’ complementary and curated product portfolios, best-in-class safety, service quality, global infrastructures and customer relationships.

With a large suite of highly engineered technologies, the combined company will provide customers with innovative solutions for both onshore and offshore applications, driving a more stable and diverse revenue mix.

The combined company is expected to derive approximately 56% of its revenue from the international and offshore markets and approximately 44% from the North American onshore markets (U.S. and Canada). The combined company will have a strong balance sheet with a pro forma, year-end 2023 net cash position of $99 million.

Transaction highlights:

• Accelerate the marketing of Dril-Quip’s leading onshore Canadian wellhead business (Great North) in the U.S. onshore market through Innovex’s operational and sales infrastructure.
• Enable the growth of Innovex’s broad downhole tools portfolio across the large Canadian onshore market through Dril-Quip’s strong Canadian footprint and customer relationships.
• Leverage Dril-Quip’s leading subsea expertise, brand name and customer relationships to facilitate further market penetration of Innovex’s existing deepwater well construction portfolio.
• Create the opportunity to cross-sell Innovex’s products alongside select Dril-Quip offerings
• Increase the company’s global scale and footprint across several growing markets (including Saudi Arabia, Mexico, South America and the Asia Pacific region).
• Create a more flexible and lean manufacturing footprint to deliver cost-effective and high-quality mission-critical products.
• Utilize best-in-class research and development capabilities to deliver next-generation, innovative products and to position the combined company at the forefront of energy technologies and solutions.

The combined company will be headquartered in Houston, Texas.

Dril-Quip President and Chief Executive Officer Jeffrey Bird said, “This transaction is aligned with the growth strategy we have been pursuing and will advance our position as a leading developer and provider of highly engineered and innovative equipment, services and technologies for the global oil and gas industry. The multi-decade legacy and strong reputation of Dril-Quip’s technology, brand and expertise, paired with the customer-centric, innovative and execution-oriented cultures of both companies will help us continue to manufacture and deliver innovative products and service to our customers and create opportunities for our employees.”

“Additionally, the complementary global scale and product breadth of the combined company will provide a strong platform for organic revenue growth, strong EBITDA margins and the potential for significant free cash flow generation to drive value for our stockholders.”

Innovex Chief Executive Officer Adam Anderson said, “We are bringing together the great traditions and capabilities of Dril-Quip with Innovex’s proven operating model. By empowering the combined organization using Innovex’s collaborative ‘No Barriers’ culture, we will unleash the capabilities of the combined company to create a unique energy industrial platform with durable margins, low capital intensity and the potential for superior returns on capital throughout industry cycles.”

“This combination creates a scaled enterprise with a long history of value-added product development,” said John V. Lovoi, Dril-Quip’s Chairman of the Board. “In addition, the two companies possess unique strengths which we believe will drive meaningful revenue pull-through in coming years in the most important oil and gas producing regions globally. Following the integration of the two businesses, the pro forma financial metrics are expected to result in a very favorable growth and return profile for our stockholders.”