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Natural Gas Supplier Buys Energy Infrastructure Firm
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Shares of full-service oil & gas solutions provider Exterran Corp. traded 60% higher after the company reported it agreed to be acquired by Enerflex Ltd. of Canada in an all-stock transaction for US$735 million.

Prior to the open of U.S. markets today, Texas midstream infrastructure
solutions firm Exterran Corp. (EXTN:NYSE), which offers products and turnkey services to oil & gas, water and power services companies and Calgary-based Enerflex Ltd. (EFX:TSX), supplier of natural gas compression, oil and gas processing and other equipment, announced that the two companies entered into an agreement combining the companies' operations in order to create a premier integrated global energy infrastructure provider.

The companies advised that under the terms of the merger agreement, "Enerflex will acquire all of the outstanding common stock of Exterran on the basis of 1.021 Enerflex common shares for each outstanding share of common stock of Exterran." The firm noted that after the transaction is completed, the newly merged Enerflex will have about 124 million outstanding common shares with an enterprise value of around US$1.5 billion.

The report indicated that the all-stock transaction sets the value for Exterran at approximately US$735 million, which according to the news release is 18% higher than Exterran's enterprise value as of Friday, January 21, 2022.

After the transaction has been finalized, existing owners of Exterran will own approximately 27.5% of all Enerflex common shares outstanding with current Enerflex shareholders owning the remaining 72.5%.

Enerflex will continue to be headquartered in Calgary, Alta. Canada and operate under the same name following the completion of the acquisition. The report noted that Enerflex President, CEO and Director Marc Rossiter will continue to serve in the same capacity and will be tasked with overseeing all aspects of integration. The firm's share will continue to trade on the Toronto Stock Exchange though the firm mentioned that it plans apply for listing in the U.S. on either the NYSE or the NASDAQ.

Enerflex Ltd.'s President and CEO Marc Rossiter stated, "This is an exciting day in the history of our companies. The transaction is immediately accretive to shareholders; enhances our presence, offerings, and scale across our regions; and importantly, executes upon our years-long strategic goal of increasing recurring revenues to improve the profitability and resiliency of our platform…Enerflex and Exterran each have a long history of global expertise in the delivery of modular energy solutions. Together, we are more efficient and better positioned in global capital markets. The Transaction will improve our ability to partner with an expanded set of customers to solve their growing energy infrastructure challenges with integrity, creativity, commitment, and success."

Exterran Corp.'s President and CEO Andrew Way commented, "We are excited about the ability to create shareholder value through this transaction and improving our product and service offering. The scale and efficiencies this combination brings is the right path for Exterran and brings significant opportunities for accelerated growth in produced water treatment and energy transition products and services."

The report indicated that combining the two companies will help form a premier integrated global energy infrastructure firm. The companies were said to have highly complementary product lines and geographies which together will enhance efficiencies, scale and expanded product and service offerings for customers.

The combined entity is expected to have a well-balanced geographic presence with about 25-35% of revenues being derived fairly evenly between North America, the Middle East and Latin America. The company stated that it expects that after 12-18 months it will be able to achieve annual cost savings of US$40 million.

The report indicated that each company's respective Board of Directors has already unanimously approved the transaction and recommends that shareholders vote in favor of the transaction. The companies advised that the transaction is expected to close in Q2/22 or Q3/22 subject to approval by both Exterran's and Enerflex's shareholders. In addition, the merger remains subject to ordinary closing conditions, TSX and U.S. exchange requirements and necessary government regulatory approvals.

Enerflex's CEO commented on the rationale for the merger stating, "the timing is right for this transaction as it strengthens its positioning while global energy markets recover from the pandemic-induced lows. Natural gas is a transition fuel that, together with renewables, will lead the world toward a lower carbon future."

Enerflex is based in Calgary, Alta. and was described as "a single source supplier of natural gas compression, oil and gas processing, refrigeration systems, and electric power generation equipment – plus related engineering and mechanical service expertise." The company is engaged in the design, engineering, manufacture, construction, operation and servicing of hydrocarbon handling systems. The firm employs around 2,000 people worldwide.

Exterran is headquartered in Houston, Tex. and operates in around 25 countries. The company is a global systems and process company that offers services and products for the oil, gas, water and power industries. The company listed that it provides natural gas processing and treatment and compression products and critical midstream infrastructure solutions to its global customers

Exterran Corp. started the day with a market cap of around $99.9 million with approximately 33.3 million shares outstanding and a short interest of about 5.6%. EXTN shares opened more than 60% higher today at $4.84 (+$1.84, +61.33%) over Friday's $3.00 closing price. The stock has traded today between $4.32 and $4.90 per share and closed for trading at $4.79 (+$1.79, +59.67%).


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