• Complementary combination creates an innovation leader with increased scale, a diverse product portfolio and geographic footprint with anticipated resilient earnings to drive value throughout industry cycles
• All-stock transaction allows stockholders to participate in combined company’s future value creation while providing a strong financial profile with a pro forma, year-end 2023 net cash position of $99 million
• Combination immediately improves pro forma company’s profitability and free cash flow generation including estimated cost synergies of approximately $30 million per year
• Transaction is expected to be immediately accretive to earnings and free cash flow

Dril-Quip, a leading developer, manufacturer and provider of highly engineered equipment and services for the global offshore and onshore oil and gas industry, and Innovex Downhole Solutions, a global leading provider of mission-critical technologies and services across the well lifecycle for the oil and gas industry, today 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) and would have more than $1.0 billion in annual revenue and $221 million in adjusted(1) Earnings Before Interest, Taxes, Depreciation, and Amortization (“adjusted EBITDA”) including synergies in fiscal 2023 (all figures on a pro forma, full-year 2023 combined basis). The combined company will have a strong balance sheet with a pro forma, year-end 2023 net cash position of $99 million(2).

Dril-Quip President and Chief Executive Officer Jeffrey Bird said: 
“I’m excited for the opportunities this transaction will provide Dril-Quip’s stakeholders. 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.”

The combination is expected to:

• Provide substantial and immediate earnings and free cash flow accretion, with anticipated pro forma adjusted EBITDA margins in excess of 20%, including synergies.
• Achieve annual cost synergies of approximately $30 million within 24 months after the transaction closes (with the expectation that approximately 50% of the annual cost synergies will be realized within 12 months).
• 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.

Leadership

Upon closing of the transaction, Innovex Chief Executive Officer Adam Anderson will become Chief Executive Officer of the combined company and will join its Board of Directors. Kendal Reed, current Chief Financial Officer of Innovex, will serve as Chief Financial Officer of the combined company. The remainder of the combined company’s leadership team is expected to include executives from both Dril-Quip and Innovex.

Upon closing, the Board of Directors of the combined company will consist of nine directors, comprising four independent directors from the current Dril-Quip Board, four directors from the current Innovex Board, and Chief Executive Officer Adam Anderson, with John V. Lovoi, Dril-Quip’s current Chairman of the Board, serving as Chairman of the combined company’s Board.

(1) Adjusted EBITDA is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” regarding how we define adjusted EBITDA.
(2) Pro forma, year-end 2023 net cash position is based on Dril-Quip and Innovex 12/31/23 balance sheets and includes anticipated distributions and excludes transaction expenses.

KeyFacts Energy Industry Directory: Dril-Quip   l   KeyFacts Energy: Acquisitions & Mergers news