CALGARY, ALBERTA--(Marketwire - Dec 17, 2012) - Total Energy Services Inc. (TOT.TO) ("Total" or the "Corporation") is pleased to announce that it has entered into a letter agreement (the "Letter Agreement") with an arm''s length third party (the "Vendor") to acquire substantially all of the assets related to the process equipment fabrication business (the "Purchased Business") currently conducted by the Vendor for $14.0 million plus the value of inventory on hand at closing which is currently estimated to be approximately $3.0 million (the "Acquisition"). Total intends to finance the Acquisition with cash on hand.
The Purchased Business is a well-established business located in Calgary, Alberta that manufactures oil and natural gas process equipment for sale in Canada and internationally. The Purchased Business employs approximately 100 people and is expected to generate approximately $3.5 million of EBITDA for 2012 on sales exceeding $30 million.
The assets related to the Purchased Business to be acquired by Total include a 65,000 square foot fabrication facility located on 8 acres of land, shop tools and equipment, inventory, furniture and fixtures, assignable contracts and other assets currently used in the conduct of the Purchased Business. The Corporation expects to combine the assets of the Purchased Business with Total''s existing process equipment fabrication business, Spectrum Process Systems Inc. ("Spectrum"). Spectrum has entered into employment contracts, conditional on completion of the Acquisition, with substantially all of the employees of the Purchased Business, including the senior management team.
Total has completed due diligence investigations in respect of the Acquisition and the Board of Directors of the Corporation has approved the Acquisition. Completion of the Acquisition remains subject to satisfaction of a number of customary conditions in favor of Total, including receipt of all necessary third-party consents and approvals, execution and delivery of a formal agreement of purchase and sale, conduct of the Purchased Business in the ordinary course until closing of the Acquisition and the execution and delivery of non-competition agreements by the Vendor and its parent corporation. The Letter Agreement also provides for various conditions in favor of the Vendor, including receipt of all necessary third-party consents and approvals and the execution and delivery of a formal agreement of purchase and sale. The Letter Agreement provides that Total and the Vendor will use reasonable efforts to complete the Acquisition with effect as of January 1, 2013.
When completed, the Acquisition is expected to significantly increase Total''s presence in the process equipment fabrication business. In October 2012, Spectum took possession of a newly constructed 20,000 square foot manufacturing facility which is located in close proximity to the facility to be acquired pursuant to the Acquisition. The Purchased Business will increase Spectrum''s fabrication capacity and provide Spectrum with experienced personnel and a well-established market presence both domestically and internationally.
Total is a growth oriented energy services corporation involved in contract drilling services, drilling and production rentals and natural gas compression and process equipment fabrication, sales, rental and service. The common shares of Total are listed and trade on the TSX under the symbol "TOT".
Cautionary Statement Respecting Non-IFRS Financial Measures
Estimated revenue and EBITDA for the Purchased Business (for the 12 months ending December 31, 2012) are financial measures that have been included in this news release to enable readers to assess, at a high-level, the pro forma financial effect of the Acquisition on certain key financial accounts of Total. Revenue means the estimated revenue generated by the Purchased Business for the applicable period. EBITDA means earnings before interest, taxes, depreciation and amortization and has been estimated in a manner consistent with the manner in which Total calculates EBITDA. Estimated revenue and EBITDA for the Purchased Business are not audited and are not recognized measures under International Financial Reporting Standards ("IFRS").
Management of Total regularly provides information concerning Total''s EBITDA for various periods, as Management believes that EBITDA is a useful supplemental measure, which provides an indication of the results generated by Total''s primary business activities prior to consideration of how those activities are financed, amortized or how the results are taxed in various jurisdictions. Investors are cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of the Purchased Business'' financial performance. Total''s method of calculating the Purchased Business'' revenue and EBITDA may differ from other organizations and, accordingly, the estimates of the Purchased Business'' revenue and EBITDA contained in this news release may not be comparable to measures used by other organizations.
Cautionary Statement Respecting Forward-Looking Information
Certain information set out in this News Release constitutes forward-looking information. Such forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "intend", "could", "might", "should", "believe" and similar expressions. Forward-looking statements are based upon the opinions and expectations of management of the Company, as at the effective date of such statements and information provided or disseminated by third parties (including the Vendor). Although the Corporation believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, and that information obtained from third party sources is reliable, it can give no assurance that those expectations will prove to have been correct. Forward-looking statements are subject to certain risks and uncertainties (known and unknown) that could cause actual outcomes to differ materially from those anticipated or implied by such forward-looking statements, including, but not limited to a failure to complete the Acquisition (due to a failure to satisfy one or more of the conditions set out in the Letter Agreement, or otherwise). Accordingly, readers should not place undue reliance upon the forward-looking statements contained in this News Release and such forward-looking statements should not be interpreted or regarded as guarantees of future outcomes.
- Mergers, Acquisitions & Takeovers