Newpark Resources, Inc. (NYSE: NR) (“Newpark” or the “Company”)
today announced that it has completed the sale of the Company’s
equity interests in substantially all of the Company’s Fluids
Systems segment (“Sale Transaction”) to SCF Partners, Inc. ("SCF")
a leading private equity firm serving the global energy
industry.
Under the terms of the Sale Transaction agreement, the base sale
price of the business is $127.5 million, adjusted by $43 million to
reflect lower estimated working capital conveyed at closing as
compared to the average 2023 net working capital balance, accrued
taxes and certain other liabilities, and $10 million of outstanding
debt. Net Sale Transaction consideration is $56 million, which
reflects $70 million of cash proceeds received at closing, net of
$19 million of foreign cash conveyed with the business, along with
a $5 million interest-bearing seller note receivable. The final
purchase price remains subject to customary adjustments based upon
final working capital, accrued taxes and certain other liabilities,
debt and cash conveyed at closing. As a result of the anticipated
loss to be recognized on the Sale Transaction, the Company expects
to generate additional U.S. federal net operating loss tax benefits
of approximately $7 million to $10 million, which along with
approximately $20 million of existing U.S. federal net operating
loss and other credit carryforward tax benefits, will be available
to offset future U.S. federal tax obligations.
Having concluded the Sale Transaction, the Fluids Systems
segment will be reclassified and reported as Discontinued
Operations for all periods reported.
In conjunction with the Sale Transaction, the Company’s U.S.
asset-based revolving credit agreement (“ABL Facility”) has been
amended, reducing the facility size from $175 million to $100
million, among other changes. After giving effect for the net
proceeds received from the Sale Transaction, Newpark had total cash
of approximately $40 million and proforma availability of
approximately $55 million under the ABL Facility as of September
13, 2024. Newpark intends to use the net proceeds towards a
combination of organic investments in its composite matting fleet,
opportunistic inorganic growth, and share buybacks under its
existing $50 million share repurchase authorization.
MANAGEMENT COMMENTARY
“Over the last two years and through this Sale Transaction, we
have engaged in a systematic process to transform our fluids
business into a more profitable and capital-light operation,
driving efficiencies and generating more than $200 million from
Fluids Systems divestitures and working capital reductions. This
cash generation was redeployed into the growth of our Industrial
Solutions business, while also reducing debt by nearly $150
million, returning $50 million to shareholders through the purchase
of nearly 12% of our outstanding shares, and building a U.S. cash
balance of approximately $40 million,” stated Matthew Lanigan,
President and CEO of Newpark. “The completion of the Sale
Transaction brings that process to a conclusion, marking an
important strategic milestone for our Company as we are now able to
focus on growing our scale as a leading, pure-play specialty rental
and services business in the global worksite access and critical
infrastructure markets.”
“The sale simplifies our business model and meaningfully
improves our margin profile, return on investment and profitability
potential, while enabling us to commit 100% of our attention to our
growth strategy. In the coming months, we will also rebrand the
Company and pursue the appropriate industry re-classification to
reflect our strategic focus beyond the Company’s historical
oilfield association and better align with our future growth market
coverage,” continued Lanigan. “We are excited to see our Fluids
Systems business and the Newpark brand under the ownership of SCF
who have an outstanding record of growing businesses and wish them
both every success in the future.”
Deviyani Misra-Godwin, Director at SCF, stated, “For over 25
years, Newpark Fluids Systems has maintained a leading position in
the drilling and completions fluids space worldwide, improving
customer performance by providing industry-leading service quality.
Newpark Fluid Systems’ global footprint, top quartile safety
performance, leading portfolio of technology and preeminent
position in the growing geothermal space will accelerate success in
the evolving energy landscape. Together with the leadership team,
we look forward to creating tremendous value for our customers and
employees in this next chapter of growth.”
Newpark Fluid Systems’ CEO, David Paterson, commented, “We are
thrilled to partner with SCF. This new partnership will be a source
of enormous value creation for both our customers and the entire
Newpark Fluids Systems team. Our global strategic growth plan will
now accelerate under a new and focused board with significant
energy experience and commitment. SCF’s unsurpassed track record of
success in the global energy services industry provides exciting
opportunities as we look to the future.”
Lazard served as Newpark’s exclusive financial advisor in
connection with the sale and Baker McKenzie served as legal
advisor.
COMPELLING TRANSACTION RATIONALE
- Simplified business structure now positioned to become a
leading, pure-play specialty rental business, prioritizing capital
deployment toward organic and inorganic growth, and return of
capital program. Newpark intends to prioritize capital
investment in the growth of its matting fleet to support increased
rental demand, which historically has generated annualized
cash-on-cash returns in excess of 25%. With the largest composite
matting fleet in the United States, the Company is uniquely
positioned to provide worksite access solutions to a diverse base
of end-markets, including customers within the power and energy
infrastructure sectors, where its DURA-BASE® composite matting
system has become the standard for performance excellence. With a
service life of up to approximately 15 years, the DURA-BASE system
offers a safer, longer-lasting replacement to traditional wooden
mats, which currently represent an estimated 75% of the U.S.
market. The Company also remains focused on the opportunistic
acquisition of complementary worksite access businesses in adjacent
markets, while remaining active under its share repurchase
authorization.
- Reframes investment opportunity around a singular,
higher-margin, free cash generative business. On a trailing
12-month basis through the second quarter 2024, the Industrial
Solutions business generated revenue and operating income of $219
million and $58 million, respectively, reflecting an operating
margin in excess of 26%.
ABOUT NEWPARK RESOURCES
Newpark Resources, Inc. is a site access solutions company that
manufactures, sells, and rents industry-leading sustainable
composite matting products, along with a full suite of services,
including planning, logistics, and remediation. As a geographically
diversified company, the Company delivers superior quality and
reliability across critical infrastructure markets, including
electrical transmission & distribution, oil and gas
exploration, pipeline, renewable energy, petrochemical,
construction, and other industries. For more information, visit our
website at www.newpark.com.
FORWARD-LOOKING STATEMENTS
This news release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of
1995, as amended. All statements other than statements of
historical facts are forward-looking statements. Words such as
“will,” “may,” “could,” “would,” “should,” “anticipates,”
“believes,” “estimates,” “expects,” “plans,” “intends,” and similar
expressions are intended to identify these forward-looking
statements but are not the exclusive means of identifying them.
These statements are not guarantees that our expectations will
prove to be correct and involve a number of risks, uncertainties,
and assumptions. Many factors, including those discussed more fully
elsewhere in this release and in documents filed with the
Securities and Exchange Commission by Newpark, particularly its
Annual Report on Form 10-K, and its Quarterly Reports on Form 10-Q,
as well as others, could cause actual plans or results to differ
materially from those expressed in, or implied by, these
statements. These risk factors include, but are not limited to,
risks related to our streamlined business structure and future
branding; divestitures; the worldwide oil and natural gas industry;
our ability to generate organic and inorganic growth; economic and
market conditions that may impact our customers’ future spending;
our customer concentration and reliance on the U.S. exploration and
production market; our international operations; the ongoing
conflicts in Europe and the Middle East; operating hazards present
in the oil and natural gas and utilities industries and substantial
liability claims, including catastrophic well incidents; our
contracts that can be terminated or downsized by our customers
without penalty; our product offering and market expansion; our
ability to attract, retain, and develop qualified leaders, key
employees, and skilled personnel; expanding our services in the
utilities sector, which may require unionized labor; the price and
availability of raw materials; inflation; capital investments and
business acquisitions; market competition; technological
developments and intellectual property; severe weather, natural
disasters, and seasonality; public health crises, epidemics, and
pandemics; our cost and continued availability of borrowed funds,
including noncompliance with debt covenants; environmental laws and
regulations; legal compliance; the inherent limitations of
insurance coverage; income taxes; cybersecurity incidents or
business system disruptions; activist stockholders that may attempt
to effect changes at our Company or acquire control over our
Company; share repurchases and our return of capital program; and
our amended and restated bylaws, which could limit our
stockholders’ ability to obtain what such stockholders believe to
be a favorable judicial forum for disputes with us or our
directors, officers or other employees. We assume no obligation to
update any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
securities laws. Newpark's filings with the Securities and Exchange
Commission can be obtained at no charge at www.sec.gov, as well as
through our website at www.newpark.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20240913040363/en/
IR CONTACT Noel Ryan or Paul Bartolai
Investors@Newpark.com
Newpark Resources (NYSE:NR)
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