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Dawson Geophysical (DWSN), TGC Industries (TGE) Enter Merger Agreement

October 9, 2014 6:19 AM EDT

Dawson Geophysical Company (Dawson) (Nasdaq: DWSN) and TGC Industries, Inc. (TGC) (Nasdaq: TGE) jointly announced a proposed strategic business combination. Upon consummation of the transaction, current Dawson and TGC shareholders will own approximately 66% and 34% of the combined company, respectively. Closing of the transaction is anticipated during the first calendar quarter of 2015, subject to the approval by holders of 66.67% of the outstanding shares of both TGC and Dawson, as well as certain other closing conditions and regulatory approvals.

The transaction is structured as a tax-free stock-for-stock transaction. Dawson will merge with a TGC subsidiary and become a wholly-owned subsidiary of TGC. TGC will change its name to Dawson Geophysical Company (hereinafter referred to as new Dawson). The new Dawson shares will trade on NASDAQ under the symbol DWSN.

Immediately prior to the transaction, TGC will implement a 1-for-3 reverse stock split. The reverse stock split will provide for a sufficient number of TGC authorized shares to consummate the transaction and adjust the number of post-transaction shares to facilitate trading within reasonable price ranges and volumes on NASDAQ. After giving effect to the TGC reverse stock split, Dawson shareholders will receive 1.76 shares of TGC split-effected common stock for each share of Dawson common stock held at the effective time of the transaction, with cash to be paid in lieu of any fractional shares. For example, at the effective time of the transaction, a TGC shareholder currently owning 100 shares of TGC common stock will own 33 shares of split-effected TGC common stock, while a Dawson shareholder currently owning 100 shares of Dawson common stock will receive 176 shares of TGC split-effected common stock. As a result of the reverse stock split, TGC's currently outstanding shares will be reduced from approximately 22,001,125 million to 7,333,708 million shares and TGC will issue approximately 14,236,022 million TGC split-effected shares in exchange for approximately 8,065,233 shares held by Dawson shareholders. Based on the above-noted exchange ratio and reverse stock split, at the effective time of the transaction, the implied valuation of the current Dawson shares should be three times the trading price of the TGC shares multiplied by 1.76.

Stephen Jumper, current Chairman, President and Chief Executive Officer of Dawson, will serve as Chairman, President and CEO of new Dawson. Wayne Whitener, current President, CEO and a Director of TGC, will serve as Vice Chairman of the Board and an officer of new Dawson. Ongoing operations will be conducted under the Dawson and Eagle Canada names.

In addition to Messrs. Jumper and Whitener, the Board of Directors of new Dawson will include four members of the current Dawson board - Craig Cooper, Gary Hoover, Ted North and Mark Vander Ploeg - and two members of the current TGC board – William Barrett and Dr. Allen McInnes.

The Dawson and TGC Boards of Directors have approved the transaction, and directors and certain officers representing approximately 28.89% of outstanding TGC shares and approximately 2.40% of outstanding Dawson shares have agreed to vote in favor of the transaction. The Boards of Directors of both companies have recommended to their respective shareholders that they vote in favor of the transaction.

Transaction Highlights:

  • Expanded geographical presence and expertise to better serve client base
  • Combined strong balance sheet will provide increased operational and financial flexibility
  • Complementary equipment bases increase operational efficiencies and logistics
  • Improved processes and increased efficiencies lead to lower cost structure and increased revenue
  • Increased level of services and reduced outsourcing
  • Increased channel count for improved efficiency, higher resolution imaging and to meet increased channel count requirements
  • Expanded client base and order book will increase crew utilization rates

Stephen Jumper, Chairman, President and Chief Executive Officer of Dawson, said, "This is an exciting time for our companies as we work together to combine our complementary resources and create a best-of-breed company. The combination of Dawson and TGC results in a stronger company that will better serve our valued clients, shareholders and employees. The demand on our technology has been to produce cost-effective, high-resolution images in a shorter cycle time. The combination of Dawson and TGC improves our ability to meet that demand with an expanded equipment base, logistics advantages, and improved services and expertise. Collectively, our resources are further positioned to increase utilization rates, reduce costs and provide multiple avenues of growth for the combined company."

Wayne Whitener, President and Chief Executive Officer of TGC, said, "We are extremely pleased to join forces with the Dawson Geophysical team. The combination of our shared technical, operational and international expertise provides opportunities to better serve our company's client base. I look forward to contributing to the success and growth of the combined organization."

Jumper concluded, "The combination of Dawson and TGC is well-positioned to respond to the needs of today's industry. We believe the benefits of this combination will extend to our valued clients, shareholders and employees for years to come. We encourage your support as we approach the shareholder vote and look forward to putting into action our more than 100 years of combined industry experience."

Raymond James & Associates, Inc. served as financial advisor to Dawson while Stephens Inc. served as financial advisor to TGC. Baker Botts L.L.P. served as legal counsel to Dawson while Haynes and Boone LLP served as legal counsel to TGC.



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