Announcement • Jan 26
Enerflex Ltd. (TSX:EFX) entered into a definitive agreement to acquire Exterran Corporation (NYSE:EXTN) from Chai Trust Co LLC, EGI-Fund B L.L.C., EGI-Fund C, L.L.C, EGI-Fund (05-07) Investors, L.L.C., EGI-Fund (08-10) Investors, L.L.C, EGI-Fund (11-13) Investors, L.L.C and others for approximately $210 million.
Enerflex Ltd. (TSX:EFX) entered into a definitive agreement to acquire Exterran Corporation (NYSE:EXTN) from Chai Trust Co LLC, EGI-Fund B L.L.C., EGI-Fund C, L.L.C, EGI-Fund (05-07) Investors, L.L.C., EGI-Fund (08-10) Investors, L.L.C, EGI-Fund (11-13) Investors, L.L.C and others for approximately $210 million on January 24, 2022. Pursuant to the terms of agreement, each share of Exterran and each security will be exchanged for 1.021 Enerflex common shares in an all-stock transaction. The transaction value for Exterran is approximately $735 million, which represents an 18% premium to Exterran’s enterprise value as of January 21, 2022. The transaction value paid for Exterran implies an EV/2022E Adjusted EBITDA of 3.6x and Price/2022E Cash Flow of 1.9x, including synergies, respectively. Upon closing of the Transaction, Enerflex and Exterran shareholders will respectively own approximately 72.5% and 27.5% of the total Enerflex common shares outstanding. Enerflex will continue to trade on the Toronto Stock Exchange (“TSX”) and intends to apply to either the New York Stock Exchange (the “NYSE”) or the NASDAQ exchange (“NASDAQ”) for the listing of Enerflex common shares to be effective upon transaction close. Upon closing, Exterran Common Stock will be delisted from the New York Stock Exchange. The company will operate as Enerflex Ltd. and will remain headquartered in Calgary, Alberta, Canada.
In the event of termination, Enerflex is required to pay Exterran a termination fee of $30 million while Enerflex is required to pay Exterran a termination fee of $20 million. Additionally, Enerflex is required to pay Exterran a termination fee of $20,000,000 if (a) prior to obtaining Enerflex shareholder approval, Enerflex terminates the Merger Agreement to enter into a definitive agreement with a third party to effect a Parent Superior Proposal; or (b) Exterran terminates the Merger Agreement in the event of a Enerflex Change of Recommendation, as set forth in, and subject to the conditions of, the Merger Agreement. Enerflex must also pay Exterran a $20,000,000 termination fee if the Merger Agreement is terminated in certain specified circumstances where a Parent Alternative Proposal to the Merger has been made and not withdrawn at least two (2) business days prior to the Enerflex shareholders’ meeting and, within twelve (12) months following such termination, Enerflex enters into a definitive agreement in respect of an alternative transaction of the type described in the relevant provisions of the Merger Agreement, or such transaction is consummated. Additionally, Exterran is required to pay Enerflex a termination fee of $10,000,000 if (a) prior to obtaining the Exterran shareholder approval, Exterran terminated the Merger Agreement to enter into a definitive agreement with a third party to effect a Company Superior Proposal; or (b) Enerflex terminates the Merger Agreement in the event of a Exterran Change of Recommendation, as set forth in, and subject to the conditions of, the Merger Agreement. Exterran must also pay Enerflex a $10,000,000 termination fee if the Merger Agreement is terminated in certain specified circumstances where a Company Alternative Proposal to the Merger has been made and not withdrawn at least two (2) business days prior to Exterran’s stockholders’ meeting and, within twelve (12) months following such termination, Exterran enters into a definitive agreement in respect of an alternative transaction of the type described in the relevant provisions of the Merger Agreement, or such transaction is consummated
On January 24, 2022, concurrently with the execution of the merger agreement, Exterran entered into a voting agreement with the directors and executive officers of Enerflex, pursuant to which such shareholders agreed to vote their Enerflex shares and other securities in favor of the issuance of Enerflex shares pursuant to the merger agreement. Chai Trust Company, LL and the directors and executive officers of Exterran holding shares have also entered into a voting agreement.
In conjunction with the Transaction, Enerflex has entered into a binding agreement with the Royal Bank of Canada to provide Enerflex with a fully committed financing consisting of a $600 million 3-year revolving credit facility and a $925 million 5-year bridge loan facility. The bridge loan will provide financing to backstop an anticipated issuance of new debt securities prior to closing of the Transaction. The committed financing is sufficient to fully repay existing Enerflex and Exterran notes and revolving credit facilities and support putting in place a new capital structure, provide for capital expenditures and other ordinary course capital needs, and provide significant liquidity for the pro forma business. One Exterran director will be appointed to Enerflex’s Board of Directors at closing. Marc Rossiter will continue to serve as Enerflex’s President and Chief Executive Officer and a member of the Board of Directors of Enerflex and will oversee all aspects of integration. anjay Bishnoi will continue to serve as Enerflex’s Chief Financial Officer. Enerflex’s Executive Management Team will continue to serve in their current roles. The transaction is subject to adoption of the merger agreement by the Exterran stockholders, the approval of the issuance of Enerflex common shares as the merger consideration by the Enerflex shareholders, expiration or termination of any waiting period applicable under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended as well as the receipt of certain antitrust approvals outside of the United States, Enerflex Common Shares having been conditionally approved for listing on the NYSE or Nasdaq, US Registration Statement shall have become effective, regulatory approval, among others. Merger shall qualify (i) as a “reorganization” within the meaning of Section 368(a) of the Code and (ii) for an exception to the general rule of Section 367(a)(1) of the Code, and (b) this Agreement be, and is hereby adopted as, a “plan of reorganization” for purposes of Sections 354, 361 and 368 of the Code.
Board of directors of Enerflex and Exterran unanimously approved the transaction. The transaction is expected to close in the second or third quarter of 2022. The transaction is immediately accretive to shareholders and is expected to approximately double Adjusted EBITDA and be over 50% accretive to cash flow per share and approximately 50% accretive to earnings per share (subject to purchase price allocation to be determined upon closing), for Enerflex shareholders. RBC Dominion Securities Inc. and RBC Capital Markets acted as financial advisors for provided fairness opinion to Enerflex. Brian P. Fenske of Norton Rose Fulbright US LLP, Norton Rose Fulbright Canada LLP, Davies Ward Phillips & Vineberg LLP, and Cravath, Swaine & Moore LLP acted as legal advisors for Enerflex. TD Securities and Scotia Capital acted as strategic advisors to Enerflex. Wells Fargo Securities, LLC acted as financial advisor for provided fairness opinion to Exterran Board. Keith Townsend and Robert J. Leclerc of King & Spalding LLP and McCarthy Tétrault LLP acted as legal advisors for Exterran.