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Onshore oilfield services provider Cactus Inc. has clinched a $621 million agreement to acquire FlexSteel Technologies Holdings Inc., giving it oomph to build out pipeline technologies used during a well’s lifecycle.
Houston-based Cactus designs, manufactures, sells and rents a range of wellhead and pressure control equipment primarily for onshore unconventional oil and gas wells throughout the United States and Australia. FlexSteel, also based in Houston, operates across the United States and Canada, manufacturing spoolable pipe technologies primarily used during a well’s lifecycle.
“This acquisition enhances Cactus’ position as a premier manufacturer of specialized technologies delivered directly to our industry’s end-users,” CEO Scott Bender said.
FlexSteel also shares many characteristics with Cactus, he noted.
“Both businesses have succeeded by making highly technical sales to market-leading customers. FlexSteel’s products are also highly complementary to Cactus’ equipment at the wellsite. As such, we believe this company meets the exacting criteria we have described over the last several years.”
FlexSteel offers “meaningful growth potential driven by the industry’s shift away from legacy offerings in favor of more technologically advanced solutions,” Bender said. It also is following the trend “toward larger diameter products and penetration into new markets, such as midstream, international, shallow-water and carbon capture.
Over time, we expect to realize the benefits of cost efficiencies by implementing our existing supply chain expertise and utilizing the combined company’s infrastructure to deliver specialized products to an expanded customer base.”
The merger is set to be completed early this year. In addition to the upfront purchase price, “there is a potential future earn-out payment of up to $75 million to be paid in mid-2024 if certain revenue growth targets are met by FlexSteel,” the companies said.
FlexSteel CEO Thirucherai Sathyanarayanan would continue to lead the business.
During 3Q2022, Cactus generated revenue of $184.5 million and income from operations of $51.3 million. For 3Q2021, revenue was $115.3 million, with operational income of $20.8 million.
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Most Cactus revenue was generated from Product sales in the quarter, which increased 8.5% sequentially to $121.8 million. In 3Q2021, product revenue was $74.8 million. The 3Q2022 growth was driven by sales of wellhead- and production-related equipment as drilling activity increased and from cost recovery efforts.
FlexSteel generated revenue of $265 million for the first nine months of 2022.
For the transaction, Cactus obtained bridge financing to fund the upfront purchase price together with cash on hand.
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