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CSI Compressco LP (NASDAQ:CCLP) disclosed its acquisition by Kodiak Gas Services, Inc (NYSE:KGS) in an all-equity transaction valued at approximately $854 million, including the assumption of $619 million of net debt, based on the closing price of Kodiak's stock on December 18, 2023.
As per the deal, CSI Compressco unitholders will receive 0.086 shares of KGS common stock for each unit they own, representing a price of about $1.65 per unit based on the closing price of KGS' stock on December 18, 2023.
The transaction is expected to close in Q2 FY24, subject to certain regulatory approvals and other closing conditions.
Post-deal closure, KGS shareholders will realize immediate accretion to Discretionary Cash Flow and Free Cash Flow per share.
With the addition of CCLP, KGS will get the largest contract compression fleet in the industry with 4.3 million revenue-generating horsepower, while also extending KGS' service offerings deeper into the natural gas value chain through CCLP's treating, gas cooling and aftermarket services businesses.
Upon closing, CCLP's unitholders will own approximately 14% of the combined company on a fully diluted basis.
The combined entity is expected to generate adjusted EBITDA of around $630 million in 2024 after the expected annual run-rate cost synergies of about $20 million.
The transaction is anticipated to be immediately accretive to Kodiak's Discretionary Cash Flow and Free Cash Flow per share, and leverage-neutral after expected synergies.
Moreover, Kodiak expects to achieve its long-term leverage target of 3.0-3.5x by year-end 2025.
Price Action: CCLP shares are down 5.42% at $1.57 on the last check Tuesday.
