Apergy to acquire ChampionX upstream energy unit of Ecolab for $4.4bn

Apergy acquisition of ChampionX : Texan oilfield equipment company Apergy has signed a deal worth about $4.4 billion to acquire the upstream energy operations of Ecolab‘s subsidiary Nalco Champion, as per the latest US oil and gas industry news.

As part of the deal, Apergy will assume the upstream energy unit’s net debt of about $492 million.

Terms of the Apergy, ChampionX merger

The Texan oilfield equipment company will issue approximately 127 million shares to existing shareholders of Ecolab, upon closing of the transaction.

Ecolab’s shareholders will own around 62% of the enlarged oilfield equipment provider, while the remainder stake of nearly 38% will be with shareholders of Apergy.

ChampionX is the name that will be assumed by the business involved in the deal, which is in the process of being spun put from Ecolab, a water, hygiene and energy technologies and services provider based in Minnesota.

The operations of ChampionX include drilling, completion, energy production, chemistry sciences, and solutions that are currently part of the energy segment of Ecolab.

According to Apergy, ChampionX is estimated to have revenue of about $2.4 billion in 2019.

The downstream chemistry solutions business from the former energy segment of Ecolab will not be part of the Apergy, ChampionX merger, and will be retained by the former.

Apergy acquisition of ChampionX. Photo courtesy of John R Perry from Pixabay.

Apergy acquisition of ChampionX is expected to create a leading player across the world for life of field production optimization solutions with an enterprise value of nearly $7.4bn. The combined company will offer artificial lift equipment, chemical solutions, and digital technologies to help customers boost their productivity over the well lifecycle, with nearly 80% of revenue from production-related product lines.

Rationale behind Apergy acquisition of ChampionX

Sivasankaran Somasundaram – President and CEO of Apergy, commenting on Apergy acquisition of ChampionX, said: “The ChampionX business is a ‘top box’ performer within our value creation framework, and will accelerate our strategic goals of broadening our product portfolio and geographic footprint, as well as expanding our customer relationships.

“The transaction is consistent with our strategic priorities of reducing cyclicality and decreasing leverage. Additionally, the Combined Company will be on the cutting edge of technology and development in the oilfield with a patent portfolio of over 2,400 global patents. Culturally, our organizations are very similar with a focus on customer centricity, advancement of technology, and continuous improvement.”

The combined company resulting from Apergy, ChampionX merger will have over 8,000 employees.

Douglas M. Baker, Jr. – Ecolab Chairman and CEO, commenting on Apergy acquisition of ChampionX, said: “This transaction is a terrific development for both Apergy and ChampionX. It brings together two established industry leaders, creating a strong and focused entity with an experienced management team, considerable scale and a broader range of solutions that better serve customer needs.

“These commercial merits, together with the significant synergies expected to be realized through the combination, should drive even more attractive shareholder value for Ecolab shareholders than our original spin plan.

“This combination should also create more opportunities for our ChampionX associates, whom we thank for their many contributions and wish them every success in the future. Given that we have already been working towards a spinoff of ChampionX, we expect this to be a smooth transition for the business.”

Apergy acquisition of ChampionX is expected to be wrapped up by the end of Q2 2020, subject to customary closing conditions such as Apergy shareholders’ approval and also regulatory approvals.