(Forum Energy, 5.Jan.2024) — Forum Energy Technologies, Inc. (NYSE: FET) completed the acquisition of Variperm Energy Services, a manufacturer of customized downhole technology solutions, providing sand and flow control products for heavy oil applications. Total consideration for the acquisition consisted of $150mn of cash and 2mn shares of FET’s common stock, subject to customary purchase price adjustments.
“This accretive acquisition enhances FET’s downhole and artificial lift product portfolio by adding a leading manufacturer of customized downhole technology solutions in sand and flow control for heavy oil applications. We expect the combined global footprint of FET and Variperm to benefit both legacy FET and Variperm products,” said Neal Lux, President and CEO of FET. “We are excited to welcome the Variperm employees to the FET team.”
Transaction Financing
The cash consideration for the transaction was funded from cash on hand, borrowings under our ABL credit facility, and a $60mn seller term loan. The seller term loan will mature in December 2026 and provides for an initial interest rate of 11% that is subject to escalation after the first anniversary of the loan. The seller term loan is payable at any time without penalty.
As previously disclosed, FET completed an amendment to the company’s ABL credit facility in Nov. 2023 to, among other things, (i) permit the Variperm acquisition, (ii) increase the aggregate revolving commitments from $179mn to $250mn, (iii) extend the maturity date to Sep. 2028, and (iv) allow the seller term loan. The effectiveness of the above amendments was conditioned on the closing of the acquisition, which condition has been satisfied.
Inducement Grants
FET, in connection with the acquisition of Variperm, granted certain restricted stock unit awards (the “Inducement Grants”) intended to qualify as “inducement grants” under the “employment inducement awards” exemption in Section 303A.08 of the New York Stock Exchange Listed Company Manual to fourteen employees of Variperm as an inducement for them to continue to provide services to Variperm and FET following the acquisition. None of the grantees are executive officers of FET and none of the awards were individually negotiated.
The fourteen employees received an aggregate of 39,000 restricted stock units (“RSUs”). The RSUs will vest in full on the second anniversary of the closing date of the acquisition of Variperm, subject to the employee’s continued employment through such vesting date.
Advisors
FET was represented in the transaction by Goldman Sachs & Co. LLC as financial advisor and Gibson, Dunn & Crutcher LLP and Goodmans LLP as legal counsel. Variperm was represented by TPH&Co., the energy business of Perella Weinberg Partners, as financial advisor and Vinson & Elkins LLP and Bennett Jones LLP as legal counsel.
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