The deal is expected to close early in the fourth quarter and more than double the size of Independence’s pad-optimal rig fleet, according to a July 19 press release.
Sidewinder unitholders will receive more than 36.75 million ICD shares in total, valued at more than $148.85 million based on ICD’s July 18 closing price of $4.05 per share. That will give Sidewinder unitholders 49 percent of Independence’s total outstanding shares once the deal closes. Collectively, affiliates of MSD Partners hold the largest stake in Sidewinder and will retain about 31 percent of the combined company, according to a presentation about the deal.
Additionally, Independence will assume an estimated $50 million of Sidewinder’s net debt. When the deal closes, Independence also will enter into a $130 million, secured, five-year-non-amortizing term loan and a $40 million revolving credit facility. The loan proceeds will be used to refinance Independence’s and Sidewinder’s debt.
Anthony Gallegos, Sidewinder’s current president and CEO, will lead the combined company along with Philip Choyce, Independence’s current executive vice president and CFO. The combined company’s board of directors will consist of seven members: Gallegos plus four existing Independence board members, including current Chairman Thomas Bates, and two members appointed by the controlling owners of Sidewinder.
A filing with the U.S. Securities and Exchange Commission noted that current Independence CEO Byron Dunn’s employment and service as a director will terminate when the deal closes, but it did not provide further details.
“The benefits to ICD of this combination are significant and the industrial and geographic fit is obvious,†Dunn said in the release. “We expect to gain significant size and scale, expand growth opportunities and realize significant synergies. We also expect to strengthen our cash flows and balance sheet, add operational expertise and capabilities, and create significant opportunities to market additional rigs into our expanding customer base.â€
After making “modest upgrades to five Sidewinder rigs,†Independence’s post-acquisition pad-optimal rig fleet will total 34 rigs by the end of 2019, per the release and the presentation. The combined company’s operations will be focused in the Permian Basin, Haynesville region as well as other basins in Texas and its neighboring states. The acquisition is expected to create more than $8 million in annual synergies.
“Through the combination of our operations and premier assets strategically located in North America’s most active basins, I believe we have compelling opportunities for operational synergies and growth as well as career advancement for the employees of both companies,†Gallegos said in the release. “I look forward to working with the board, management team and the collective employees as we navigate the combined company into its next chapter.â€
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