Notable Mergers and Acquisitions 10/7: (CIT) (TOT)/(CG) (FI) (SPP)/(SNI)

October 7, 2016 9:58 AM EDT

Find out which companies are about to raise their dividend well before the news hits the Street with's Dividend Insider Elite. Sign-up for a FREE trial here.

*** CIT Group Inc. (NYSE: CIT) announced that it has entered into a definitive agreement to sell CIT Commercial Air, its commercial aircraft leasing business, to Avolon Holdings Limited (“Avolon”), the international aircraft leasing company and a wholly-owned subsidiary of Bohai Capital Holding Co. Ltd. The transaction is expected to close by the end of the first quarter of 2017, subject to regulatory approvals and customary closing conditions.

CIT has received a “non-objection” from the Federal Reserve Bank of New York for its Amended Capital Plan subject to the closing of the transaction. The Amended Capital Plan authorizes CIT to return $2.975 billion of common equity to shareholders from the net proceeds of the sale; return up to an additional $0.325 billion of common equity contingent upon the issuance of a similar amount of Tier 1 qualifying preferred stock; and pay common dividends totaling $64 million per year after the transaction is completed, subject to quarterly approval by the CIT Board of Directors.

“The sale of CIT Commercial Air represents an important milestone for CIT and follows an extensive dual-track process that was designed to maximize shareholder value. This transaction will strengthen our balance sheet, simplify our business and enable us to return significant capital to our shareholders,” said Ellen R. Alemany, Chairwoman and Chief Executive Officer of CIT Group. “We are making meaningful progress on our strategy to create a leading national middle-market bank. I want to thank all of our employees, and in particular those in Commercial Air, whose solid commitment to building an outstanding franchise over more than 40 years has enabled the success of this transaction.”

CIT is selling the CIT Commercial Air business to Avolon, including its operations, forward order commitments, and as of June 30, 2016, certain assets of $11.1 billion and liabilities of $1.7 billion. The Adjusted Net Assets Amount total $9.4 billion which Avolon is purchasing for a price of $10.0 billion, representing a premium of 6.7%.

The transaction is subject to receipt of regulatory approvals in the United States, China and certain other foreign jurisdictions, the approval of Bohai’s shareholders and the satisfaction of customary closing conditions. HNA Group, Bohai’s majority shareholder, has agreed to vote its shares in Bohai in favor of the transaction. To reflect its commitment to the transaction, Avolon has deposited $500 million into an escrow account with a U.S. bank (which will be increased to $600 million during the pendency of the transaction), which is payable to CIT at closing as part of the purchase price and in certain circumstances if the transaction is not consummated.

J.P. Morgan Securities LLC served as exclusive financial advisor to CIT Group, and Bank of America Merrill Lynch provided capital markets structuring advice. Wachtell, Lipton, Rosen & Katz served as legal counsel to CIT Group. Sullivan & Cromwell provided bank regulatory advice on the Amended Capital Plan.

*** Total (NYSE: TOT) announced today:

In the context of the divestiture process of its specialty chemicals’ affiliate, Atotech B.V., a global manufacturer of high technology plating solutions, Total has selected the offer from The Carlyle Group (Nasdaq: CG). In the framework of this transaction, Total will receive $3.2 billion, representing 11.9 times Atotech’s 2015 adjusted EBITDA.

Carlyle is a global alternative asset manager that is well positioned in Asia, Europe and the United States through its significant range of investments, and is one of the most experienced private equity investors in the global chemicals industry. With its deep understanding of Atotech’s businesses, Carlyle is well positioned to create meaningful value for Atotech as it continues to grow and develop its operations, customer base and talented workforce.

“Atotech, which is very active in Asia, is the worldwide leader in its high tech segment, with a business model focused on innovation and customer relationships. Carlyle will enable Atotech to pursue its growth ambitions and serve its customers while respecting its commitments towards its employees and stakeholders. This transaction is part of Total’s portfolio management strategy, which aims to align the Group’s asset base with its business ambition. It also forms part of the $10 billion divestment program over 2015-2017 announced by the Group”, commented Patrick Pouyanné, Chairman & CEO of Total.

Equity for the transaction will come from Carlyle Europe Partners IV, a €3.75 billion buyout fund, and Carlyle Partners VI, a $13 billion U.S. buyout fund.

Gregor Boehm, Managing Director and Co-Head of Carlyle Europe Partners, said: “With its intense customer focus and state-of-the-art R&D capabilities, Atotech is poised for continued growth and innovation. We look forward to partnering with the company’s management team and employees to fully realize Atotech’s potential.”

Martin Sumner, Managing Director on Carlyle’s Industrial and Transportation team, said: “Atotech is a strong business with excellent growth prospects in the global plating chemicals and equipment industry. Carlyle looks forward to supporting Atotech’s management team through continued investment in superior technology innovation and solutions for its global customer base.”

The proposed transaction is subject to the applicable legally required consultation and notification processes for employee representatives and to approval by the relevant antitrust authorities.

*** Frank's International (NYSE: FI) announced that it has entered into a definitive merger agreement to acquire Blackhawk Group Holdings, Inc., the ultimate parent company of Blackhawk Specialty Tools LLC (“Blackhawk”), a leading provider of well construction and well intervention services and products. Blackhawk is being purchased from Bain Capital Private Equity, a leading global private investment firm which acquired the business together with management in 2013.

Frank’s expects that Blackhawk’s specialty cementation tools will augment its tubular running services business by providing Frank’s the opportunity to diversify its offerings and emerge as a leader in a new business line and a significantly larger addressable market. In addition to what Frank’s believes is a line of well-regarded, market leading, technically differentiated specialty cementation tools, Blackhawk also provides well intervention products through its line of brute packers and related products, and is continuing its development of products for onshore and offshore applications.

Gary Luquette, Frank’s President and Chief Executive Officer, commented, “Similar to Frank’s, Blackhawk has a reputation for combining exceptional service with an innovative portfolio of technology that delivers consistent value to customers. Together we will continue to offer the same reliable service customers expect, while furthering customer relationships with new products and services across the Frank’s global footprint. Joining Blackhawk’s cementing tool expertise with Frank’s global tubular running services franchise will allow us to offer customers worldwide a more integrated suite of best-in-class products and services to address their well construction needs across all environments from land to shelf to deepwater.”

Billy Brown, Blackhawk’s Chief Executive Officer and a founder of the company, stated, “Joining the Frank’s global family is the next step in continuing the expansion of Blackhawk’s industry leading specialty products and equipment. Our team is proud of the progress we have made in developing innovative products and strong customer relationships through quality and reliable service, and we appreciate the support we have enjoyed from our partners at Bain Capital. Combining Frank’s and Blackhawk is the right strategic move at the right time, providing customers the same exceptional service with a broader platform to accelerate future growth.”

Todd Cook, a Managing Director at Bain Capital Private Equity, said, “We have been pleased to work with and support the experienced team at Blackhawk in executing a focused and durable strategy in a demanding, sophisticated market. We look forward to participating in the significant growth we believe will flow from combining these two best in class service providers.”

The merger consideration comprises a combination of approximately $150 million of cash on hand and approximately 12.8 million shares of Frank’s common stock, on a cash-free, debt-free basis (with approximately $80 million of Blackhawk debt being repaid at closing with proceeds from the transaction), subject to adjustment. Based on the Frank’s closing price on Thursday, October 6, 2016 the transaction is valued at approximately $321 million.

Frank’s is focused on driving revenue synergies, and expects the acquired products and services to benefit from Frank’s global presence, operating excellence and strong balance sheet, significantly enhancing the growth potential of the business. Additionally, over time, Frank’s expects to realize the benefits of increased cost efficiency by providing a broader set of product offerings through its combined global infrastructure and optimizing supply chain operations to take advantage of the expanded business.

The transaction is subject to regulatory approvals and other customary closing conditions. It is anticipated that the closing of the transaction will occur during the fourth quarter of 2016.

Morgan Stanley & Co. LLC served as Frank’s exclusive financial advisor on the transaction, and legal advice was provided by Baker & McKenzie LLP. Blackhawk was advised by Simmons & Company International, the energy specialist unit of Piper Jaffray, and legal advice was provided by Ropes & Gray LLP.

Frank’s will host a conference call to discuss the merger on Friday, October 7, 2016 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). Participants may join the conference call by dialing (888) 771-4371 or (847) 585-4405. The conference access code is 43569843. The webcast and presentation materials will be accessible on the Investor Relations section of the Company’s website,

An audio replay of the conference call will be available approximately two hours after the conclusion of the call and will remain available for seven days. It can be accessed by dialing (888) 843-7419 or (630) 652-3042. The conference call replay access code is 43569843. The replay will also be available in the Investor Relations section of the Frank’s website approximately two hours after the conclusion of the call and will remain available for approximately 90 days.

*** Sanchez Production Partners LP (NYSE: SPP) announced that the Partnership has executed definitive agreements with Sanchez Energy Corporation (NYSE: SN) (“Sanchez Energy”) pursuant to which the Partnership anticipates:

  • SPP will acquire Sanchez Energy’s 50% interest in Carnero Processing, LLC (“Carnero Processing”) for an initial payment of approximately $47.7 million in cash and the assumption by SPP of remaining capital commitments to Carnero Processing, which are estimated at approximately $32.3 million (the “Carnero Processing Transaction”);
  • SPP will acquire certain production assets, located in South Texas, from Sanchez Energy for total consideration of $27 million, prior to normal and customary closing adjustments (the “Production Asset Transaction”); and
  • SPP will obtain an option to acquire a lease for a tract of land leased from the Calhoun Port Authority in Point Comfort, Texas (the “Port Comfort Lease”).

CARNERO PROCESSING TRANSACTIONCarnero Processing is currently constructing a cryogenic natural gas processing plant in La Salle County, Texas which is expected to be operational in early 2017 (the “Raptor Plant”). The Raptor Plant will be connected to Sanchez Energy’s Catarina asset in the Eagle Ford Shale in South Texas via the Carnero Gathering System, which is 50% owned by SPP through Carnero Gathering, LLC (“Carnero Gathering”). Carnero Processing and Carnero Gathering, joint ventures that are 50% owned and operated by Targa Resources Corp. (NYSE: TRGP) (“Targa”), have firm capacity, fixed fee agreements with Sanchez Energy for 125,000 Mcf/d of plant processing and associated pipeline capacity for five years. Pursuant to the agreements, Sanchez Energy has dedicated its Catarina acreage and all production developed at the asset to the joint ventures during a 15 year term. Sanchez Energy also has the option to deliver additional volumes and commit additional acreage to the Raptor Plant as production increases. Sanchez Energy plans to spend approximately two-thirds of its 2016 drilling and completion budget at Catarina, and considers the asset a key part of its development focus and growth strategy.


The Production Asset Transaction includes working interests in 23 producing Eagle Ford wellbores located in Dimmit and Zavala counties in South Texas together with escalating working interests in an additional 11 producing wellbores located in the Palmetto Field in Gonzales County, Texas (the location of SPP’s first Eagle Ford acquisition, which closed in March 2015). The Production Asset Transaction is expected to add approximately 700 Boe/d of production, on average, in 2017. The estimated proved reserves from the producing wellbores is approximately 2,136 MBoe, of which 73% is oil, 13% natural gas liquids, and 14% natural gas. Subject to the terms and conditions of its credit agreement, the Partnership intends to execute hedges for up to five years on the incremental production in conjunction with transaction closing.

PORT COMFORT LEASEThe Port Comfort Lease would provide the Partnership with a strategic location for the intended construction of a marine crude storage terminal with a joint venture partner, which is expected to be completed in early 2017. Once complete, the terminal is expected to include 350,000 shell barrels of storage capacity.

Management Commentary

“We continue to demonstrate how the strategic relationship between SPP and Sanchez Energy can be leveraged to enable each company to better optimize its respective strategies, capital resources, and financial targets,” said Gerry Willinger, Chief Executive Officer of the general partner of SPP. “The transactions announced today further extend our business development relationship with Sanchez Energy, a company that has a substantial inventory of midstream and production assets with characteristics favorable to the MLP model. We anticipate the transactions will increase SPP’s midstream and production revenue and Adjusted EBITDA as we complete 2016 and head into 2017.”“As previously discussed, the Catarina asset is central to Sanchez Energy’s asset base and plans for future development in South Texas. Since acquiring the asset in 2014, Sanchez Energy has reported strong results from its drilling program at Catarina, where the company has identified over 1,350 net potential drilling locations. We anticipate the stacked pay potential and expected rates of return from this asset will continue to drive Sanchez Energy’s future growth plans, resulting in a continuing need to access infrastructure assets as it develops the lease. The Raptor Plant, which will be connected to the Catarina asset by the Carnero Gathering System, is a strategic asset that we believe will allow us to capture more of the value chain from Sanchez Energy’s South Texas production and realize further upside from third party volumes. We are excited to be further aligned with Sanchez Energy and its plans for the Catarina asset, and look forward to capitalizing on opportunities to grow alongside this leading Eagle Ford operator over time.”


The Carnero Processing Transaction and Production Asset Transaction, which are expected to close in the fourth quarter 2016, are subject to the satisfaction of customary closing conditions, including SPP’s arrangement of financing to pay the purchase price under each transaction agreement.

To keep up on all the Mergers & Acquisitions data in real-time, go to our M&A Insider page.

Serious News for Serious Traders! Try Premium Free!

You May Also Be Interested In

Related Categories

Special Reports

Related Entities

Piper Jaffray, JPMorgan, Morgan Stanley, Merrill Lynch, Bank of America, Bain Capital, The Carlyle Group, Crude Oil, Notable Mergers and Acquisitions, Definitive Agreement

Add Your Comment