Houston’s Key Energy, the Texas company with a regional office in El Reno and operations throughout Oklahoma announced Monday a proposal to combine with Basic Energy Services in an all-stock merger.
Key sent letters to management and Basic’s Board of Directors on September 20 and again on Sept. 23 outlining the merger proposal and a desire to negotiate a transaction.
Key state it believes that the proposed combination is attractive strategically and financially for both companies given the highly complementary nature of their respective businesses and significant cost synergies that could be realized in the combination.
Basic Energy is headquartered in Fort Worth, Texas and its website states it supports six geomarkets conducting markets in the Texas Gulf Coast region, the Central Region, the Permian Basin of West Texas, California, the Appalachian region and the Rocky Mountains.
It also has a regional office in Yukon, Oklahoma where it offers well servicing, snubbing, water logistics, saltwater disposal, and rental/fishing tools. Basic Energy has other Oklahoma offices in Cushing, Duncan, Fairview, Lindsay, Waukomis and Woodward.
Under the terms of the proposal, Key shareholders would own approximately 51% of the combined company and Basic shareholders would own 49%, representing a 15% premium to the 10-day VWAP1 before consideration of synergies. Including the estimated annual run rate synergies of $65 million, Key believes that the estimated total value to Basic shareholders is equivalent to an approximate 89% premium to Basic’s unaffected 10-day VWAP1.
Robert J. Saltiel, Key’s President and Chief Executive Officer, stated, “We are ready to move ahead swiftly to finalize a combination with Basic. We believe such a combination will create significant value for both shareholder groups and result in the combined company being a leader in the production services segment.”
“We believe the proposed financing announced by Basic could be detrimental to both the structure of a combination and its value to shareholders. Basic’s proposed financing would likely cause meaningful additional cost to a combined company, reducing the significant synergies shareholders would otherwise realize through a merger. As a result, the proposed financing might effectively preclude a combination between Key and Basic and prevent the substantial value creation for all shareholders enabled under our proposal.”
Saltiel concluded, “We have tremendous respect for the Board, management and employees of Basic. We believe that we will be able to capitalize on the strengths of each organization to create a stronger combined company better able to invest in people and assets to serve the needs of our customers.”