HOUSTON, June 17, 2019 /PRNewswire/ -- C&J Energy
Services ("C&J") (NYSE: CJ) and Keane Group, Inc. ("Keane")
(NYSE: FRAC) today announced that they have entered into a
definitive agreement whereby the companies will combine in an
all-stock merger of equals. The combined company will be positioned
as an industry-leading, diversified oilfield services provider with
a pro-forma enterprise value of approximately $1.8 billion, including $255 million of net debt.
Under the terms of the merger agreement, which has been
unanimously approved by the Boards of Directors of both companies
and the Special Committee of the Keane Board, C&J shareholders
will receive 1.6149 shares of Keane common stock for each share of
C&J common stock owned. The merger agreement permits C&J to
pay its shareholders a cash dividend of $1.00 per share prior to closing. Upon closing,
Keane and C&J shareholders will, in the aggregate, each own 50%
of the equity of the combined company on a fully diluted basis. The
share exchange is expected to be tax-free.
The merger of equals will create a leading well completion and
production services company in the U.S., with increased scale and
density across services and geographies with a prominent presence
in the most active U.S. basins. Both C&J and Keane share a
commitment to safety and integrity, employee development,
partnerships with blue-chip customers, technological innovation,
and strong community relationships, all of which will be reflected
in the operations of the combined company. On a pro-forma basis,
the combined company would have approximately $4.2 billion in net revenue and approximately
$636 million in adjusted EBITDA for
the 12 months ended March 31, 2019.
In addition, the two companies anticipate to achieve annualized
run-rate cost synergies of $100
million within 12 months after closing. With approximately
$173 million in cash, or $106 million after the $1.00 per share cash dividend is paid to C&J
shareholders, the combined company will have flexibility to invest
in growth and technology and return capital to shareholders.
"The merger of equals unites two great companies, resulting in a
broader portfolio of well completion services across an even
greater footprint in the U.S., benefiting our combined employees,
shareholders, customers, suppliers, and the communities in which we
operate," said Robert Drummond,
Chief Executive Officer of Keane. "With two strong teams, enhanced
and diversified operations, a strong balance sheet, ample
liquidity, attractive free cash flow and a legacy of successful
R&D, the combined company will be well positioned to further
invest in technology and innovation, as well as the career
development of our employees to drive sustainable growth in our
dynamic industry. In C&J, we've found a partner who is equally
committed to our strong employee culture with a focus on safety and
customers, with whom we are eager to join forces to leverage our
combined resources and strengths."
Don Gawick, President and Chief Executive Officer of C&J,
said, "This agreement to merge C&J and Keane underscores the
highly complementary nature of our two platforms and cultures. We
are excited by the many strategic and financial benefits of this
combination, including the opportunities for our employees from the
greater scale and enhanced capabilities of the combined company.
For the customers and markets we serve, our people will continue to
deliver the highest level of customer service with quality, safety,
integrity and innovation. Given the shared safety focus and passion
for excellence of our highly talented workforces, I am confident
that the opportunity to leverage each other's strengths will enable
a combined organization where the sum of both parts makes a much
greater whole. Alongside our talented Keane colleagues, we look
forward to expanding and deepening our service capabilities,
enhancing our relationships with blue-chip customers and generating
long-term, sustainable shareholder value."
Compelling Strategic and Financial Benefits of the Merger of
Equals:
- Greater Scale and Density Across Services and
Geographies: Together, the combined company will have
2.3 million hydraulic fracturing horsepower ("HHP") consisting of
approximately 50 frac fleets, 158 wireline trucks, 81 pumpdown
units, 28 coiled tubing units, 139 cementing units and 364 workover
rigs, which together will create a leading U.S. well completion and
production services company. The combined company will also have a
larger footprint in the most active U.S. basins, including the
Permian, Marcellus / Utica, Eagle Ford, Rockies / Bakken,
Mid-Continent and California,
among others.
- Significant Synergies and Enhanced Opportunity for Value
Creation and Investment: The combined company expects to
generate annualized run-rate cost synergies of approximately
$100 million within a year after
closing through cost reductions in sales, general and
administrative expenses, supply chain management and optimization
of operational processes. In addition, in the highly fragmented,
dynamic and evolving oilfield services industry, the combined
company is well-positioned to deliver enhanced shareholder returns
given anticipated potential for growth and improved margins through
the increased utilization of high quality, market ready equipment,
synergy capture and benefits of size and scale. With these benefits
and enhanced daily trading liquidity, the combination provides an
attractive opportunity for equity investors.
- Strong Financial Position: Pro-forma as of March 31, 2019, the combined company will have
approximately $173 million in cash,
or $106 million after the cash
dividend is paid to C&J shareholders, with pro-forma leverage
of approximately 0.4x net debt to adjusted EBITDA. In addition, the
anticipated $100 million of
annualized run-rate synergies will enhance the future liquidity and
financial flexibility of the combined company. The merger of equals
will also be immediately accretive to cash flow per share and
increase the potential for operating cash flow generation.
Pro-forma as of March 31, 2019,
operating cash flow for the combined company would be $686 million, which excludes the $100 million of expected annualized run-rate cost
synergies.
- Complementary Cultures & Operating Philosophy: The
combined company will support sustainable growth through highly
complementary services including hydraulic fracturing, cementing,
coiled tubing, pumpdown and workover rigs. Keane and C&J will
also share best practices for customer service and operational
processes, leveraging their combined resources to enhance already
strong partnerships and organizational agility. The combined
company's talented employees will drive exceptional customer
service focused on delivering top-tier safety, efficiency and
execution. Deeper penetration in critical growth markets will also
broaden the combined company's blue-chip customer base to include
most of the largest U.S. onshore exploration and production
operators.
- Positioned for Continued Innovation and Investment: With
a shared legacy of innovative R&D and a rich portfolio of
proprietary technology, the combined company will accelerate
investments in continued innovation and advanced, value-added
technologies. These investments will include pursuing next
generation opportunities in fracking and expanding real-time data
and analytics capabilities in an effort to drive operational
efficiencies, reduce Non-Productive Time (NPT), enable
differentiated service to customers and lower operating costs.
Leadership, Governance and Headquarters
The combined company will be led by a proven management team
that reflects the strengths and capabilities of both organizations.
Upon close, Patrick Murray, Chairman
of the C&J Board of Directors will serve as Chair of the
combined company's Board of Directors, and Robert Drummond, Chief Executive Officer of
Keane, will serve as President and Chief Executive Officer of the
combined company.
Jan Kees van Gaalen, Chief
Financial Officer of C&J, will serve as Executive Vice
President and Chief Financial Officer of the combined company, and
Gregory Powell, President and Chief
Financial Officer of Keane will serve as Executive Vice President
and Chief Integration Officer of the combined company. Additional
senior executives for the combined company will be selected from
top talent at both companies and named prior to the close of the
transaction.
Upon completion of the transaction, the combined company's Board
of Directors will comprise 12 directors, six of whom will be from
the C&J Board, including the Chairman of C&J, and six of
whom will be from the Keane Board, including the Chief Executive
Officer of Keane. The combined company's corporate headquarters
will remain in Houston, Texas.
Keane and C&J each share a deep heritage and strong brand
recognition and following the closing, the combined company will
operate under a new corporate name and trade under a new ticker
symbol that will leverage the strengths of both brands. The
combined company's corporate name and ticker will be announced
prior to the close of the transaction.
Approvals and Closing
The transaction has been unanimously approved by the Board
of Directors of C&J. The transaction has been unanimously
approved by the Board of Directors of Keane, following the
unanimous recommendation of its Special Committee comprising
independent directors. The merger is expected to close in the
fourth quarter of 2019, following C&J and Keane shareholder
approval, regulatory approvals and receipt of other customary
closing conditions.
Keane Investor Holdings LLC, which includes an affiliate of
Cerberus Capital Management, L.P., Keane family and certain members
of Keane management, owns approximately 49 percent of the
outstanding shares of Keane and has entered into a support
agreement to vote in favor of the transaction.
Advisors
Citi is serving as financial advisor and Schulte Roth & Zabel LLP is serving as legal
advisor to Keane. Lazard is serving as financial advisor and
Simpson Thacher & Bartlett is serving as legal advisor to the
Special Committee of the Keane Board.
Morgan Stanley & Co. LLC is serving as lead financial
advisor to C&J, and J.P. Morgan Securities LLC is also serving
as a financial advisor to C&J. Kirkland & Ellis is serving
as legal advisor to C&J.
Analyst/Investor Conference Call and Webcast
A joint conference call and webcast will be held with the
investor community today at 7:00 am
CT/8:00 am ET to discuss the
combination and supplemental information regarding the transaction
has been provided in a joint investor presentation of C&J and
Keane, available at www.cjenergy.com and www.keanegrp.com.
Interested parties may listen to the conference call via a live
webcast accessible at
http://public.viavid.com/index.php?id=134959 or by calling
U.S. (Toll Free): 1-877-407-9716 or International: 1-201-493-6779,
and using the conference ID: 13691794.
A playback of the call will also be available by telephone
beginning at 10:00 a.m.
CT/11:00 a.m. ET today until
10:59 p.m. CT/11:59 p.m. ET on June 24,
2019 by calling U.S. (Toll Free): 1-844-512-2921 or
International: 1-412-317-6671, and using the replay pin number:
13691794.
About Keane Group, Inc.
Headquartered in Houston,
Texas, Keane is one of the largest pure-play providers of
integrated well completion services in the U.S., with a focus on
complex, technically demanding completion solutions. Keane's
primary service offerings include horizontal and vertical
fracturing, wireline perforation and logging, engineered solutions
and cementing, as well as other value-added service offerings.
About C&J Energy Services
C&J Energy Services is a leading provider of well
construction and intervention, well completion, well support and
other complementary oilfield services and technologies to
independent and major oilfield companies engaged in the
exploration, production and development of oil and gas properties
in onshore basins throughout the continental United States. C&J offers a diverse,
integrated suite of services across the life cycle of the well,
including hydraulic fracturing, cased-hole wireline and pumpdown,
cementing, coiled tubing, rig services, fluid management, other
completions logistics, and specialty well site support services.
C&J is headquartered in Houston,
Texas and operates across all active onshore basins in the
continental United States. For
additional information about C&J, please visit
https://cjenergy.com.
Forward-Looking Statements
This communication contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
that are subject to risks and uncertainties and are made pursuant
to the safe harbor provisions of Section 27A of the Securities Act
of 1993, as amended and Section 21E of the Securities Exchange Act
of 1934, as amended. Where a forward-looking statement expresses or
implies an expectation or belief as to future events or results,
such expectation or belief is expressed in good faith and believed
to have a reasonable basis. The words "believe" "continue,"
"could," "expect," "anticipate," "intends," "estimate," "forecast,"
"project," "should," "may," "will," "would" or the negative thereof
and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements are
only predictions and involve known and unknown risks and
uncertainties, many of which are beyond Keane's and C&J's
control. Statements in this communication regarding Keane, C&J
and the combined company that are forward-looking, including
projections as to the anticipated benefits of the proposed
transaction, the impact of the proposed transaction on Keane's and
C&J's business and future financial and operating results, the
amount and timing of synergies from the proposed transaction, and
the closing date for the proposed transaction, are based on
management's estimates, assumptions and projections, and are
subject to significant uncertainties and other factors, many of
which are beyond Keane's and C&J's control. These factors and
risks include, but are not limited to, (i) the competitive nature
of the industry in which Keane and C&J conduct their business,
including pricing pressures; (ii) the ability to meet rapid demand
shifts; (iii) the impact of pipeline capacity constraints and
adverse weather conditions in oil or gas producing regions; (iv)
the ability to obtain or renew customer contracts and changes in
customer requirements in the markets Keane and C&J serve; (v)
the ability to identify, effect and integrate acquisitions, joint
ventures or other transactions; (vi) the ability to protect and
enforce intellectual property rights; (vii) the effect of
environmental and other governmental regulations on Keane's and
C&J's operations; (viii) the effect of a loss of, or
interruption in operations of, one or more key suppliers, including
resulting from product defects, recalls or suspensions; (ix) the
variability of crude oil and natural gas commodity prices; (x) the
market price and availability of materials or equipment; (xi) the
ability to obtain permits, approvals and authorizations from
governmental and third parties; (xii) Keane's and C&J's ability
to employ a sufficient number of skilled and qualified workers to
combat the operating hazards inherent in Keane's and C&J's
industry; (xiii) fluctuations in the market price of Keane's and
C&J's stock; (xiv) the level of, and obligations associated
with, Keane's and C&J's indebtedness; and (xv) other risk
factors and additional information. In addition, material risks
that could cause actual results to differ from forward-looking
statements include: the inherent uncertainty associated with
financial or other projections; the prompt and effective
integration of C&J's businesses and the ability to achieve the
anticipated synergies and value-creation contemplated by the
proposed transaction; the risk associated with Keane's and
C&J's ability to obtain the approval of the proposed
transaction by their shareholders required to consummate the
proposed transaction and the timing of the closing of the proposed
transaction, including the risk that the conditions to the
transaction are not satisfied on a timely basis or at all and the
failure of the transaction to close for any other reason; the risk
that a consent or authorization that may be required for the
proposed transaction is not obtained or is obtained subject to
conditions that are not anticipated; unanticipated difficulties or
expenditures relating to the transaction, the response of business
partners and retention as a result of the announcement and pendency
of the transaction; and the diversion of management time on
transaction-related issues. For a more detailed discussion of such
risks and other factors, see Keane's and C&J's filings with the
Securities and Exchange Commission (the "SEC"), including under the
heading "Risk Factors" in Item 1A of Keane's Annual Report on Form
10-K for the fiscal year ended December 31,
2018, filed on February 27,
2019, and C&J's Annual Report on Form 10-K for the
fiscal year ended December 31, 2018,
filed on February 27, 2019 and in
other periodic filings, available on the SEC website or
www.keanegrp.com or www.cjenergy.com. Keane and C&J assume no
obligation to update any forward-looking statements or information,
which speak as of their respective dates, to reflect events or
circumstances after the date of this communication, or to reflect
the occurrence of unanticipated events, except as may be required
under applicable securities laws. Investors should not assume that
any lack of update to a previously issued "forward-looking
statement" constitutes a reaffirmation of that statement.
Non-GAAP Measures
Adjusted EBITDA (the "Non-GAAP Measure") is a performance
measure that provides supplemental information that C&J and
Keane believe is useful to analysts and investors to evaluate
ongoing results of operations, when considered alongside other GAAP
measures such as net income, operating income and gross profit.
This Non-GAAP Measure excludes the financial impact of items
management does not consider in assessing the ongoing operating
performance of C&J, Keane, or the new company, and thereby
facilitates review of its operating performance on a
period-to-period basis. Other companies may have different capital
structures and comparability to the results of operations of
C&J, Keane, or the new company may be impacted by the effects
of acquisition accounting on its depreciation and amortization. As
a result of the effects of these factors and factors specific to
other companies, C&J and Keane believe Adjusted EBITDA provides
helpful information to analysts and investors to facilitate a
comparison of their operating performance to that of other
companies. The presentation of the Non-GAAP Measure in this press
release should not be construed as an inference that its future
results will be unaffected by unusual or non-recurring items. A
reconciliation of the Non-GAAP Measure has not been provided
because such reconciliation could not be produced without
unreasonable effort.
Important Additional Information Regarding the Merger of
Equals Will Be Filed With the SEC
In connection with the proposed transaction, Keane intends to
file with the SEC a registration statement on Form S-4 that will
include a joint proxy statement of Keane and C&J that also
constitutes a prospectus of Keane. Each of Keane and C&J also
plan to file other relevant documents with the SEC regarding the
proposed transaction. No offering of securities shall be made,
except by means of a prospectus meeting the requirements of Section
10 of the U.S. Securities Act of 1933, as amended. Any definitive
joint proxy statement/prospectus (if and when available) will be
mailed to stockholders of Keane and C&J. INVESTORS AND
STOCKHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, JOINT
PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT MAY BE FILED
WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. Investors and stockholders will be
able to obtain free copies of these documents (if and when
available) and other documents containing important information
about Keane and C&J, once such documents are filed with the SEC
through the website maintained by the SEC at http://www.sec.gov.
Copies of the documents filed with the SEC by Keane will be
available free of charge on Keane's website at
http://www.keanegrp.com or by contacting Keane's Investor Relations
Department by email at investors@keanegrp.com or by phone at
281-929-0370. Copies of the documents filed with the SEC by C&J
will be available free of charge on C&J's website at
www.cjenergy.com or by contacting C&J's Investor Relations
Department by email at investors@cjenergy.com or by phone at
713-260-9986.
Participants in the Solicitation
Keane, C&J and certain of their respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information about the directors and executive officers of C&J
is set forth in its proxy statement for its 2019 annual meeting of
shareholders, which was filed with the SEC on April 9, 2019, and C&J's Annual Report on
Form 10-K for the fiscal year ended December
31, 2018, which was filed with the SEC on February 27, 2019. Information about the
directors and executive officers of Keane is set forth in Keane's
proxy statement for its 2019 annual meeting of shareholders, which
was filed with the SEC on April 1,
2019, and Keane's Annual Report on Form 10-K for the fiscal
year ended December 31, 2018, which
was filed with the SEC on February 27,
2019. Other information regarding the participants in the
proxy solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the joint proxy statement/prospectus and other relevant materials
to be filed with the SEC regarding the proposed transaction when
such materials become available. Investors should read the joint
proxy statement/prospectus carefully when it becomes available
before making any voting or investment decisions. You may obtain
free copies of these documents from Keane or C&J using the
sources indicated above.
No Offer or Solicitation
This document is not intended to and does not constitute an
offer to sell or the solicitation of an offer to subscribe for or
buy or an invitation to purchase or subscribe for any securities or
the solicitation of any vote in any jurisdiction pursuant to the
proposed transaction or otherwise, nor shall there be any sale,
issuance or transfer of securities in any jurisdiction in
contravention of applicable law. Subject to certain exceptions to
be approved by the relevant regulators or certain facts to be
ascertained, the public offer will not be made directly or
indirectly, in or into any jurisdiction where to do so would
constitute a violation of the laws of such jurisdiction, or by use
of the mails or by any means or instrumentality (including without
limitation, facsimile transmission, telephone and the internet) of
interstate or foreign commerce, or any facility of a national
securities exchange, of any such jurisdiction.
Contacts
Keane Investor Contact
Greg
Powell
President & CFO
investors@keanegrp.com
Marc Silverberg
Managing Director (ICR)
marc.silverberg@icrinc.com
C&J Investor Contact
Jan Kees"JK" van Gaalen
Chief Financial Officer
investors@cjenergy.com
Daniel Jenkins
VP –Investor Relations
investors@cjenergy.com
Media
Sharon Stern /
Ed Trissel
Joele Frank, Wilkinson Brimmer
Katcher
+1 212 355 4449
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SOURCE C&J Energy Services; Keane Group, Inc.
