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Akastor — M&A Activity 2021
Mar 2, 2021
3525_iss_2021-03-02_e3fb8465-2486-43de-972b-3f45d21f9b65.html
M&A Activity
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Akastor ASA: Baker Hughes and Akastor ASA announce joint venture company to deliver global offshore drilling solutions
Akastor ASA: Baker Hughes and Akastor ASA announce joint venture company to deliver global offshore drilling solutions
· Joint venture company (Company) will combine the Baker Hughes Subsea Drilling
Systems (SDS) business and MHWirth to better serve customers while
simultaneously driving productivity and cost synergies
· Company will have dual operational headquarters in Houston, TX and
Kristiansand, Norway
HOUSTON and FORNEBU - March 2, 2021 - Baker Hughes (NYSE:BKR) and Akastor ASA
(Oslo:AKAST) have announced an agreement to create a joint venture company
(Company) that will bring together Baker Hughes' Subsea Drilling Systems (SDS)
business with Akastor's wholly owned subsidiary, MHWirth AS (MHWirth). The
Company will deliver a global full-service offshore drilling equipment offering
that will provide customers with a broad portfolio of products and services.
The transaction will result in a leading equipment provider with integrated
delivery capabilities, financial strength, and flexibility to address a full
range of customer priorities. The Company will be owned 50-50 by Baker Hughes
and Akastor, and following the closing of the transaction, the Company's
operations will be managed from current offices in Houston, Texas, and
Kristiansand, Norway. Merrill A. "Pete" Miller will serve as chairman and chief
executive officer. Miller has been in the oil and gas industry over 40 years
holding various leadership roles including chairman, president and chief
executive officer of National Oilwell Varco.
The Company's broader scope of services will also provide a more solid
foundation for future growth, including the capability to participate in the oil
& gas industry's transition towards more energy-efficient solutions, as well as
deploying technologies and service solutions to make the sector more competitive
through increased drilling efficiency.
"I would like to express sincere gratitude to the good work and dedication shown
by the respective teams of Baker Hughes and Akastor for making this happen
despite the current challenges caused by the global COVID-19 pandemic," said
Karl Erik Kjelstad, CEO of Akastor. "I strongly believe that this Company will
give a solid basis for both organizations to meet the current challenges in
today's market and to continue as a leader in developing advanced and efficient
drilling solutions that support the industry's transition towards more
sustainable operations."
"This transaction is a major step for MHWirth, and the transformation strategy
announced in February 2019," said Kristian M. Røkke, chairman of Akastor. "The
Company will offer customers a strengthened product offering and investors
attractive value creation. This transaction will also allow Akastor to maximize,
and ultimately realize, value to its shareholders."
"The oil and gas industry is rapidly evolving, and we are constantly looking at
new and innovative ways of delivering value to our customers," said Neil
Saunders, executive vice president of Oilfield Equipment at Baker Hughes. "This
Company is the perfect fit between our respective portfolios and further
transforms our core operations for long-term success, bringing complementary
solutions to market and offering our customers a full offshore drilling
equipment package."
MHWirth is a global provider of advanced drilling solutions and services
designed to offer customers a safer, more efficient and reliable alternative.
MHWirth has a global span covering five continents with offices in 13 countries.
Baker Hughes' SDS business is a division of the Oilfield Equipment segment of
Baker Hughes and is headquartered in Houston. SDS provides integrated drilling
products and services worldwide, with service and manufacturing facilities in 11
countries and a competitive portfolio, including world-class blowout preventor
(BOP) systems, controls and riser equipment.
The closing of the transaction is subject to customary conditions, including
regulatory approvals, and is expected to occur in the second half of 2021.
Morgan Stanley, Paul Weiss, Thommessen, and EY are acting as advisors for Baker
Hughes. Goldman Sachs, BAHR, Sidley Austin, and EY are acting as advisors for
Akastor.
Key Financial information
The table below provides certain estimated pro-forma financial information for
the combined operations of SDS and MHWirth. This information is unaudited, based
on management accounts for the respective companies and provided for
illustrative purposes only. It may not be representative of reported figures
following completion of the transaction. Further, the information may not
necessarily be comparable to similar information presented by other companies
nor relied upon as any indication of what the Company's financial position or
results of operations actually would have been had the transaction been
consummated as of the dates indicated.
USD in FY 2020 Aggregated FY 2019Aggregated FY 2018 Aggregated
million[1] estimates(unaudited) estimates(unaudited) estimates(unaudited)
Revenue2 713 850 731
Adjusted 102 139 93
EBITDA (IAS
17)[3]
Note:
[1] Average FX used for corresponding period
[2] Pro forma MHWirth Group figures include MHWirth, Bronco Manufacturing (which
has been part of MHWirth since June 2019) and Step Oiltools (which became part
of MHW Group in February 2020)
[3] Items affecting comparability comprises material items outside normal
business such as net gains or losses from business and assets disposals, costs
for closure of business operations and restructurings, and other costs of non
-recurring nature.
Transaction structure and main conditions
The Company shall be owned 50/50 by Baker Hughes and Akastor. Akastor shall
contribute its shares in MHWirth to the Company in return for 50% of the shares
and USD 120 million in consideration, of which USD 100 million is payable in
cash at closing. Baker Hughes shall contribute the SDS business to the Company
in return for the other 50% of the shares and USD 200 million in consideration,
of which USD 120 million is payable in cash at closing. The Company shall issue
notes to Baker Hughes and Akastor representing the balance of the consideration
owed to them. The notes shall be subordinated to the Company's external debt
financing.
The Company will finance the cash consideration payable to Baker Hughes and
Akastor by way of a USD 220 million bank facility. In addition, the Company will
also be financed by a USD 80 million working capital facility.
The Transaction Agreement entered into by Akastor and Baker Hughes provides for
customary terms for agreements of this nature, including representations and
warranties relating to the businesses being contributed as well as an agreed
form shareholders agreement customary for a 50/50 controlled company, including
governance and exit provisions. Completion of the Transaction is subject to
customary conditions, including regulatory approval. The closing of the
Transaction is expected to take place in 2H 2021.
Implications for Akastor's corporate credit facility and accounting policies
The transaction will require the refinancing of Akastor's existing corporate
credit facility. Akastor has received commitments for a NOK 1,250 million
revolving credit facility that will be entered into prior to closing of the
transaction.
Following completion of the transaction, it is expected that MHWirth no longer
shall be accounted for as a consolidated subsidiary of Akastor. Instead, it is
expected that Akastor shall treat the Company as a joint venture for accounting
purposes and that, following which Akastor shall recognise 50% of the equity of
the Company and 50% of the Company net profits in its accounts based on the
"equity method".
Implications for Baker Hughes' accounting policies
Following completion of the transaction, it is expected that SDS will no longer
be accounted for under Baker Hughes' Oilfield Equipment segment. Instead, it is
expected that BKR shall treat the Company as a joint venture for accounting
purposes, following which BKR shall recognise 50% of the equity of the Company
and 50% of the Company net profits in its accounts based on the "equity method".
About Baker Hughes:
Baker Hughes (NYSE: BKR) is an energy technology company that provides solutions
to energy and industrial customers worldwide. Built on a century of experience
and with operations in over 120 countries, our innovative technologies and
services are taking energy forward - making it safer, cleaner and more efficient
for people and the planet. Visit us at
bakerhughes.com (https://www.bakerhughes.com/).
About MHWirth and Akastor:
MHWirth is a wholly owned subsidiary of Akastor and accounts for a material part
of Akastor's revenues and assets. Akastor has reported MHWirth as a separate
segment in its financial statements. MHWirth, with its subsidiaries, is a self
-sufficient group which is a global provider of integrated drilling solutions
and services with world class technology, leading engineering and project
management capabilities. The MHWirth group delivered in the range of 25% of all
offshore drilling packages for floaters between years 2000 and 2018. With its
headquarters in Kristiansand, MHWirth's global operations covers five continents
with offices in 13 countries.
Akastor is a Norway-based oil-services investment company with a portfolio of
industrial holdings and other investments. The company has a flexible mandate
for active ownership and long-term value creation.
The management of Akastor and MHWirth will hold an investor conference in
relation to the announced transaction on Tuesday March 2, 2021 at 14:00 CET,
which will be held as a webcast only and audiocasted live. There will be a Q&A
session following the presentation. The replay will be made available on
Akastor's website.
Live webcast and replay link:
https://channel.royalcast.com/landingpage/hegnarmedia/20210302_2/ (https://eur01.
safelinks.protection.outlook.com/?url=https%3A%2F%2Fchannel.royalcast.com%2Flandi
ngpage%2Fhegnarmedia%2F20210302_2%2F&data=04%7C01%7Cjing.li.taklo%40akastor.com%7
Ce259ab6761c14e1575d408d8d9c7f7dc%7C4532deeec4ed44d788c679ffa513472c%7C0%7C0%7C63
7498800166279404%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJB
TiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=vFvocAXG8SE5AX3LW%2B6XhtBKKYVsyeXfI5vxtg9
xEN8%3D&reserved=0)
The presentation will be available at www.akastor.com.
For further information, please contact:
Baker Hughes Investor Relations
Jud Bailey
+1 281-809-9088
Baker Hughes Media Relations
Thomas Millas
+1 713-879-2862
Akastor
Øyvind Paaske
Chief Financial Officer
Tel: +47 917 59 705
This information is subject to the disclosure requirements pursuant to
Regulation EU 596/2014 (MAR) article 17, cf. section 5-12 of the Norwegian
Securities Trading Act.