Item 1.01. Entry into a Material Definitive Agreement
On August 4, 2021, NexTier Completion Solutions Inc., a Delaware corporation (“NCS”), and NexTier Oilfield Solutions Inc., a Delaware corporation (the “Company”), entered into a Purchase Agreement (the “Purchase Agreement”) with Alamo Frac Holdings, LLC, a Texas limited liability company (“Holdings”), Alamo Pressure Pumping, LLC, a Texas limited liability company (“APP”), and the Owner Group (as defined in the Purchase Agreement), pursuant to which NCS will purchase all of the equity interests of APP (the “Acquisition”).
The transaction valuation is approximately $268 million, which includes (i) cash consideration of $100 million (ii) the issuance of 26 million shares of NexTier’s common stock (the “Acquisition Shares”), (iii) the assumption by the Company of certain existing liabilities, including $38 million of equipment obligations, and (iv) $30 million of post-closing services to be provided to Holdings or its affiliates. The Purchase Agreement also provides for potential earn-out payments, pursuant to an earnout agreement to be entered into at closing of the Acquisition (the “Earnout Agreement”), payable in the event APP achieves certain EBITDA levels through year-end 2022, Tier II equipment upgrade payments (determinable following completion of upgrades), and various purchase price adjustments.
The Purchase Agreement provides that, among other things and subject to the terms and conditions of the Purchase Agreement, the Company shall issue the Acquisition Shares necessary to effect the transactions contemplated by the Purchase Agreement. Pursuant to the Purchase Agreement and subject to obtaining third-party consents from the counterparties to certain master lease agreements, the Company shall indirectly assume equipment leases of, among other things, pumps and vehicles, entered into by APP.
The Acquisition was unanimously approved by the Company’s board of directors (the “Board”) following the unanimous recommendation of a special committee of independent members of the Board.
Completion of the Acquisition will be subject to the satisfaction or waiver of customary closing conditions. There can be no assurance that the conditions to closing the Acquisition will be satisfied or waived or that other events will not intervene to delay or result in the failure to close the Acquisition. The Purchase Agreement contains customary termination rights for each of NCS and Holdings, including, among others, if the consummation of the Acquisition does not occur on or before September 30, 2021. NCS and Holdings made the applicable filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the Acquisition on June 23, 2021 based on an executed non-binding letter of intent, and the applicable waiting period expired at 11:59 PM ET on July 23, 2021 without agency contact.
At closing of the Acquisition, the Company will enter into a registration rights agreement (the “Registration Rights Agreement”) with Holdings, pursuant to which the Company has an obligation to file a registration statement with the Securities and Exchange Commission (the “SEC”) within 30 days of the closing of the Acquisition registering with the SEC the resale of the Acquisition Shares. The Registration Rights Agreement also contains certain lock-up provisions which require Holdings to continue to own (subject to customary exceptions) the following Acquisition Shares:
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Lock-up Period
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Ownership Requirement
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Percentage of Acquisition Shares
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90 days post-closing
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26 million shares
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100%
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180 days post-closing
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20 million shares
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~77%
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360 days post-closing
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10 million shares
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~39%
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Thereafter
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None
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The above descriptions of the Purchase Agreement, Earnout Agreement and Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement, the Earnout Agreement and the Registration Rights Agreement, which are filed as Exhibit 2.1, Exhibit 10.1 and Exhibit 10.2, respectively, to this Current Report on Form 8-K and incorporated herein by reference.