Patterson-UTI Energy To Acquire Seventy Seven Energy In $1.76 Bln Deal

(RTTNews) - Patterson-UTI Energy Inc. (PTEN) and Seventy Seven Energy Inc. (SVNT.PK) announced that they have entered into a definitive merger agreement pursuant to which Patterson-UTI will acquire Seventy Seven Energy in an all-stock transaction.

As per the terms of the transaction, Patterson-UTI will acquire all of the issued and outstanding shares of common stock of Seventy Seven Energy, in exchange for approximately 49.6 million shares of common stock of Patterson-UTI. The aggregate number of shares of Patterson-UTI common stock is subject to downward adjustment if certain in-the-money Seventy Seven Energy warrants are forfeited or exercised on a net-share basis.

The transaction values Seventy Seven Energy at about $1.76 billion, assuming the issuance of 49.6 million shares of Patterson-UTI common stock at today's closing price of $28.67, plus approximately $336 million of Seventy Seven Energy's debt net of cash and warrant proceeds.

All of Seventy Seven Energy's debt is expected to be repaid at the closing of the transaction. Based on the number of shares of Seventy Seven Energy common stock expected to be outstanding or deemed outstanding as of the closing date, and assuming that the in-the-money Seventy Seven Energy warrants are exercised for cash, the exchange ratio would be approximately 1.7725 shares of Patterson-UTI common stock for each share of Seventy Seven Energy common stock, and shareholders of Seventy Seven Energy would own approximately 25% of the combined company.

The transaction is subject to customary regulatory approvals, stockholder approval of both companies and other customary closing conditions, and is expected to close late in the first quarter of 2017.

Patterson-UTI expects to achieve synergies in excess of $50 million and believes, excluding transaction costs, this merger will be accretive to cash flow per share.

The terms of the merger agreement were unanimously approved by the boards of directors of both companies. Additionally, Patterson-UTI has entered into a voting agreement with three shareholders of Seventy Seven Energy including BlueMountain Capital Management, Axar Capital Management and Mudrick Capital Management, who collectively represent more than 50% of the outstanding shares of common stock of Seventy Seven Energy.

Patterson-UTI has the financial resources to repay Seventy Seven Energy's indebtedness through a combination of cash on hand, borrowing under its $500 million revolving credit facility, which is currently undrawn, and through the use of a senior unsecured bridge financing commitment in the amount of $150 million that Patterson-UTI has arranged in connection with this transaction.

Patterson-UTI also expects to issue additional equity in connection with closing the transaction in order to maintain Patterson-UTI's historically conservative capital structure.