Dril-Quip and Innovex Downhole Solutions announce merger to create Innovex International
In a landmark move for the oil and gas sector, Dril-Quip, Inc. (NYSE: DRQ), a premier developer, manufacturer, and service provider for the offshore and onshore oil and gas industry, has entered into a definitive agreement with Innovex Downhole Solutions, Inc., a leading global provider of technologies and services for the well lifecycle. This all-stock merger aims to create Innovex International, Inc., marking a significant stride towards forming a unique energy industrial platform that spans both offshore and onshore applications.
Under the terms of the merger, Dril-Quip stockholders will hold approximately 52% of the combined entity, while Innovex stockholders will own around 48% on a fully diluted basis. The new conglomerate will boast a revenue stream heavily influenced by international and offshore markets, accounting for 56% of its income, with the North American onshore markets (U.S. and Canada) contributing approximately 44%. The pro forma annual revenue and adjusted EBITDA, including synergies for the fiscal year 2023, are projected to exceed $1.0 billion and $221 million, respectively, alongside a net cash position of $99 million by year-end 2023.
Jeffrey Bird, President and CEO of Dril-Quip, expressed his enthusiasm for the merger, emphasizing the alignment with Dril-Quip’s growth strategy and the opportunity to enhance its role as a leader in providing highly engineered, innovative equipment and services. Bird highlighted the combination of the companies’ technological prowess, global reach, and customer-centric approaches as key drivers for future growth and value creation for stakeholders.
Adam Anderson, CEO of Innovex, echoed the sentiment, focusing on the merger’s potential to leverage Innovex’s ‘No Barriers’ culture to maximize the combined company’s capabilities. The partnership is anticipated to foster durable margins, low capital intensity, and superior returns on capital through industry cycles.
The merger is expected to yield significant strategic and financial benefits, including substantial earnings and free cash flow accretion, pro forma adjusted EBITDA margins exceeding 20%, and annual cost synergies of approximately $30 million within 24 months post-closure. The combined entity aims to accelerate the marketing of Dril-Quip’s onshore Canadian wellhead business in the U.S. through Innovex’s operational infrastructure and enhance the distribution of Innovex’s downhole tools portfolio across the Canadian market, leveraging Dril-Quip’s established footprint.
The leadership of the merged company will see Innovex’s CEO Adam Anderson stepping in as the CEO of Innovex International, Inc., and joining its Board of Directors, with Kendal Reed serving as the CFO. The Board will comprise nine directors, blending expertise from both companies, and will be chaired by John V. Lovoi, Dril-Quip’s current Chairman.
Following the transaction’s close, expected in the third quarter of 2024, the combined entity will be renamed Innovex International, Inc., with its stock trading under the new ticker symbol “INVX” on the New York Stock Exchange. The merger, already approved by the boards of both companies, awaits regulatory clearance and the approval of Dril-Quip’s stockholders.
This merger between Dril-Quip, Inc. and Innovex Downhole Solutions, Inc. signifies a pivotal moment in the oil and gas industry, combining two companies’ strengths to create a diversified and resilient entity. Innovex International, Inc. will emerge as a powerhouse in the sector, with an extensive portfolio of technologies and services designed to meet the evolving needs of the global market. The strategic combination is poised to drive innovation, efficiency, and growth, creating a robust platform for delivering value to customers and shareholders alike in the dynamic energy landscape.