Team (TISI) to Acquire Furmanite (FRM) in ~$355M Deal

Team (NYSE: TISI) and Furmanite Corporation (NYSE: FRM) announced that the Boards of Directors of both companies have unanimously approved a definitive merger agreement under which Team will acquire all of the outstanding shares of Furmanite in a stock-for-stock transaction valued at approximately $335 million, including the assumption of debt, which is intended to be tax-free to Furmanite stockholders for U.S. federal income tax purposes. The transaction is subject to the receipt of customary regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. The transaction is also subject to the required approval of both Furmanite’s and Team’s stockholders. Subject to the satisfaction of closing conditions and receipt of required approvals, the companies expect to complete the combination in the first calendar quarter of 2016.

Under the terms of the proposed merger, Furmanite stockholders will receive 0.215 shares of Team common stock for each share of Furmanite common stock they own, representing an 8% premium to Furmanite’s stock price based on the closing prices of Team and Furmanite’s shares on October 30, 2015, the last trading day prior to announcement of the transaction, and an implied value of $7.53 per Furmanite share. The implied $7.53 per share value represents a 15% premium to the average Furmanite closing stock price over last 60 days prior to announcement.

The combined company expects to realize an estimated $20-$25 million in annual cost synergies within two years of closing. Synergies are primarily associated with the elimination of duplicative public company costs and back-office support functions. Team expects the transaction will be accretive to adjusted earnings per share in the first full fiscal year following the close of the transaction. By calendar year 2017, Team expects the transaction, including synergies, to contribute approximately $0.25-$0.30 to earnings per share. Before synergies, Team expects the transaction to contribute approximately $400 million in annual revenue and $38 million in annual adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization plus non-cash stock based compensation expense).

The combined company will be a premier NDT inspection and specialty mechanical services company with a strong presence in North America, and will comprise more than 8,300 employees and 220 locations in 22 countries. The combination will approximately double the size of Team’s mechanical services capabilities and establish a deeper, broader talent and resource pool that better supports customers across standard and specialty mechanical services. In addition, the capability and capacity of the combined entity will offer an enhanced single-point of accountability and flexibility in addressing some of the most critical needs of clients; whether as individual services or as part of an integrated specialty industrial services solution.

Ted W. Owen, Team’s President and Chief Executive Officer, said, “We are pleased to announce the exciting merger of Team and Furmanite, bringing together two highly complementary organizations. Through this transaction, Team will gain critical scale in our Mechanical Services Business Unit that rivals the successful NDT business we have established with the recent QualSpec acquisition that is part of our Inspection and Heat Treating Business Unit, making Team the world’s premier service provider with significant breadth and scope of operations. We expect the combination of Team and Furmanite to drive sustainable, long-term growth and value for stockholders that is greater than either company could achieve on its own.”

Mr. Owen added, “The combined company will have a larger presence across our existing core geographies and greater access to additional market opportunities around the globe, including Europe and Asia Pacific. Both Team and Furmanite have a reputation for dedicated employees focused on the highest levels of customer service, professionalism and support, and importantly, this transaction will unite the most talented employees in the industry to create a premier global workforce. We will reach across both organizations to create an enhanced company that draws from each other’s best practices to create superior options for our customers and additional opportunities for employees from both businesses.”

In connection with the merger, Furmanite announced that Joseph E. Milliron is retiring from his position as President and Chief Executive Officer of Furmanite, effective immediately. Mr. Milliron will continue as a member of the Furmanite Board of Directors. Jeffery G. Davis, Furmanite’s interim Executive Chairman of the Board, will assume additional responsibilities as interim President and Chief Executive Officer of Furmanite.

Mr. Milliron said, “I believe the merger of Furmanite and Team represents a compelling opportunity to advance our stockholders’ objectives while capitalizing on the strengths of both companies. We have known and respected Team for a long time. Together, Team and Furmanite will have enhanced scale and resources to drive growth, establish more stability in cyclical markets and create a more robust suite of services to meet the needs of all our customers. We are seeing more and more customers look to us to provide a broader range of services, offered to them on a consistent basis across all of their facilities around the world. In addition, both Furmanite and Team recognize that our employees are the key to our success, and we anticipate this combination will create new and exciting opportunities for them around the world.”

Mr. Davis said, “After a comprehensive evaluation of strategic alternatives, the Furmanite Board of Directors concluded that a merger with Team is in the best interests of Furmanite stockholders. This value-maximizing transaction will allow our stockholders the opportunity to participate in the significant expected upside driven by the compelling strategic and financial benefits of the combination. I want to thank Joe Milliron for his leadership in many executive roles at Furmanite, including most recently, as President and CEO.”

Combined Company Board, Management and Headquarters

Ted Owen will continue as Chief Executive Officer of the combined company, and Team will expand its Board of Directors to include Mr. Davis at closing. Team will continue to maintain its headquarters in Sugar Land, Texas, near Houston.

The combined Team-Furmanite Mechanical Services Business Unit will be led by Jeff Ott, who will continue to also serve as President of Team’s Quest Integrity Group, which he has led since before Team’s acquisition of Quest in 2010. Mr. Ott began his career as an engineer in the Operations Analysis group at Rockwell International's North American Aircraft. He holds a B.S. in Engineering and Operations Research from Southern Methodist University and an M.B.A. from the Amos Tuck School of Business at Dartmouth College.

Advisors

Financial advisors and consultants for Team in the transaction are Robert W. Baird & Co. Incorporated and Anthony Riker LLC, respectively, and Locke Lord LLP serves as Team’s legal counsel. Lazard Frères & Co. is acting as financial advisor to Furmanite and Wachtell, Lipton Rosen & Katz is acting as legal counsel.

Conference Call and Webcast

Team has scheduled a conference call to discuss the Furmanite merger today, November 2, 2015, at 9 am Eastern Standard Time (8 am Central). The call will be broadcast over the web and can be accessed on Team’s website, www.Teaminc.com. Individuals wishing to participate in the conference call by phone can call 877-730-9522 and use confirmation code 71563350 when prompted.

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