ProFrac Holding Corp. To Acquire U.S. Well Services in for ~$1.21/Share in All-Stock Deal

Author: Charles Gross | June 21, 2022 06:34pm
roFrac Holding Corp. (NASDAQ:PFHC) ("ProFrac" or the "Company") announced today that it has reached an agreement to acquire U.S. Well Services, Inc. (NASDAQ:USWS) ("USWS") in a stock-for-stock transaction with an exchange ratio of 0.0561 shares of ProFrac Class A common stock for each share of USWS Class A common stock. The acquisition is expected to be completed in the fourth quarter of 2022, subject to the satisfaction of customary closing conditions, including the approval of USWS stockholders. The combination creates a market leader in NextGen frac solutions and a combined company with an expected 44 active fleets by the end of 2022: Transaction expected to expand ProFrac's fleet to 44 active fleets by year end, including 12 electric fleets, 13 Tier IV dual fuel fleets, and 3 Tier IV diesel fleets Combined company expected to be the largest provider of electric frac services with 12 electric fleets Accelerates ProFrac's ESG strategy of reducing fuel costs and minimizing its emissions footprint Marries leading edge efficiency and cost structure from ProFrac with the largest electric fleet platform in the industry to deliver exceptional value for the combined company and substantial cost savings to customers ProFrac would acquire USWS' industry leading intellectual property portfolio that gave rise to electric frac technology with the market's first e-fleet deployment in 2014, which includes over 110 patents USWS Convertible Senior Notes and Series A Redeemable Preferred Shares to be converted into shares of ProFrac Class A common stock at closing Combined company expected to maintain a conservative balance sheet; ProFrac expects to separately finance remaining USWS debt at closing Expected to result in approximately $35 million of annual cost synergies and eliminate ProFrac's expected license fees to USWS of approximately $22.5 million per year over the next four years Expected to be accretive to 2023 Adjusted EBITDA Matt Wilks, ProFrac's Executive Chairman, commented, "The acquisition of U.S. Well Services solidifies ProFrac's position as an industry leader in electric hydraulic fracturing, which we believe represents the future of the industry. In today's environment, we believe electric frac fleets provide improved efficiency, lower R&M costs, greater value, and a lower overall cost of completion to our customer. It is a true win-win scenario for us, our customers, the environment and the communities in which we operate." Ladd Wilks, ProFrac's Chief Executive Officer, said, "We are excited to welcome the U.S. Well Services team to the ProFrac family. We recognize the hard work of everyone to get to this point and I am excited to join forces and build upon the foundation this team has established. By leveraging our scale and capabilities along with U.S. Well Services' Clean Fleet® technology, we intend to make ProFrac THE electric fleet provider in the U.S." Kyle O'Neill, U.S. Well Services' President and CEO, added, "We are thrilled to join forces with ProFrac. ProFrac is a best-in-class operator, and we believe the combined company will be well positioned to capitalize on the growing opportunity for electric fracturing services. This combination provides value for U.S. Well Services shareholders, employees and customers, and we look forward to working with the ProFrac team to realize our shared vision for the business." Conference Call ProFrac has scheduled a conference call on Wednesday, June 22, 2022 at 11:00 a.m. Eastern time / 10:00 a.m. Central time. Please dial 412-902-0030 and ask for the ProFrac Holding Corp. call at least 10 minutes prior to the start time of the call, or listen to the call live over the Internet by logging on to the website at the address https://ir.pfholdingscorp.com/news-events/ir-calendar. A telephonic replay of the conference call will be available through June 29, 2022 and may be accessed by calling 201-612-7415 using passcode 13730894#. A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days. Advisors Piper Sandler & Co. and Paul Hastings LLP are serving as exclusive financial and legal advisor, respectively, to the Special Committee of U.S. Well Services' Board of Directors. Porter Hedges LLP is serving as legal advisor to U.S. Well Services. Jefferies LLC and Kirkland & Ellis LLP are serving as exclusive financial and legal advisor, respectively, to the Special Committee of ProFrac's Board of Directors. Brown Rudnick LLP and Lowenstein Sandler LLP are serving as legal advisor and merger clearance counsel, respectively, to ProFrac. Transaction Overview Under the terms of the merger agreement, USWS stockholders will receive 0.0561 shares of ProFrac Class A common stock for each share of USWS Class A common stock they own, which, based on the ProFrac closing price of $21.49 on June 21, 2022, the last trading day prior to announcement of the deal, represents aggregate stock consideration of approximately $93 million and a consideration per share of USWS Class A common stock of $1.21. Effective immediately prior to the closing of the merger, each holder of USWS Series A Preferred Stock will be given the opportunity to convert their shares into USWS Class A common stock at a conversion price of $1.22 and receive the merger consideration for such shares. Any shares of Series A Preferred Stock not converted at such conversion price will automatically convert into shares of USWS Class A common stock at the then-effective conversion rate as calculated pursuant to USWS' organizational documents, and such shares will be converted into the merger consideration. Effective immediately prior to the closing of the merger, each Convertible Senior Secured (Third Lien) PIK Note will automatically convert into a number of shares of USWS Class A common stock at a conversion price of $1.22 and such shares will be converted into the merger consideration. After giving effect to these conversions, the total stock consideration payable to USWS stockholders and holders of USWS equity awards, based on the June 21, 2022 closing price, would be approximately $270 million. Concurrently with the execution of the merger agreement, the holders of USWS' Term C Loan Warrants entered into a Warrant Purchase Agreement with ProFrac pursuant to which, immediately prior to and conditioned upon the closing of the merger, such warrant holders will sell to ProFrac all of the Term C Loan Warrants for a total of $2.6 million. USWS' other outstanding warrants will become exercisable for ProFrac common stock in accordance with their terms. In connection with the execution of the merger agreement, certain stockholders of USWS entered into a voting agreement, pursuant to which such stockholders agreed to, among other things, support and vote in favor of the merger agreement and the transactions contemplated thereby. Timing and Approvals The transaction is subject to approval of USWS stockholders as well as customary closing conditions and anti-trust approvals, including expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The transaction does not include a financing condition and is expected to close in the fourth calendar quarter of 2022.

Posted In: PFHC USWS