Badger Explorer ASA has recently signed a Letter of Intent (LoI) to acquire all outstanding shares in Norway-based technology provider Dwellop AS.
Furthermore, certain shareholders of the company, representing approximately 28% of the outstanding shares, have asked the Board of Directors of the company to call for an Extraordinary General Meeting (EGM) to consider a proposal for certain corporate changes as a result of the recent private placement, including electing new board members to reflect the company’s new ownership structure.
Acquisition of Dwellop
Dwellop is an independent systems and technology provider delivering topside handling equipment for well intervention and plugging & abandonment (P&A) operations.
A large part of the business is focused on the design and manufacture of high-quality mechanical and structural wireline, coil tubing and pipe-handling equipment for the global well intervention market.
Dwellop’s business model covers both sale and rental of equipment and systems to E&P companies, service providers and vessel / rig owners, and the company has a broad product portfolio for safe and cost-efficient well intervention operations.
During the last three years, Dwellop has been successful in establishing the company as a pioneer within modular workover rigs and surface handling equipment to the well intervention market.
With a leading position in this attractive market niche, Dwellop is in a unique position to grow in a recovering market.
The company is currently involved in several advanced discussions with clients for modular rig projects intended for well intervention and P&A operations.
The company is headquartered in Stavanger, Norway, and is currently owned by management and key employees after a management buyout from Rolls-Royce in 2014.
Dwellop’s history dates back to 1989, and the company currently has 40 employees.
In 2016, Dwellop generated Nkr209m in revenues, Nkr46.5m in EBITDA and Nkr38.2m in net income.
Pursuant to the LoI, Badger will purchase 100% of the outstanding shares in Dwellop for an agreed purchase price of Nkr190m, whereof Nkr60m shall be settled in cash at closing and Nkr130m shall be settled by issuance of new shares in Badger at an agreed subscription price of Nkr0.65 per share (the ‘Remuneration Shares’).
As per 31 December 2016, Dwellop had a net cash position of approximately Nkr12.2m and net working capital of approximately Nkr16.6m.
Prior to completion of the ongoing subsequent offering (the ‘Subsequent Offering II’), the Remuneration Shares will constitute approximately 15.9% of the total outstanding shares of Badger.
The sellers have agreed to a lock-up period of 36 months for the Remuneration Shares after closing of the transaction, as well as customary non-compete and non-solicitation provisions.
Due to Dwellop’s strong business and product portfolio, the company will be organized as a standalone portfolio company of Badger and will be developed on a separate basis going forward.
The purchase price implies EV / EBITDA and P / E transaction multiples of 3.8 and 5.0, respectively.
The transaction is subject to satisfactory outcome of a confirmatory due diligence process, final and binding documentation and Badger board approval.
Further, the issuance of the Remuneration Shares must be resolved by the general meeting of Badger.
The acquisition of Dwellop will require the Company to issue a supplemental prospectus to the prospectus for the Subsequent Offering II of 14 February 2017.
The chairman of Badger comments: "We are thrilled to work with Dwellop’s management team to grow the company both organically and pursue other acquisition opportunities within the well intervention market.
"In a continued challenging market for oil & gas companies, we believe that products and technologies which facilitate enhanced oil recovery at low costs will continue to be in strong demand going forward.
"In addition to the acquisition of Dwellop, we are also pursuing other potential acquisition opportunities, in order to continue the growth and development of Badger into a larger and diversified entity, in line with our communicated strategy."
Proposal to call for an Extraordinary General Meeting
Certain shareholders of the company, representing approximately 28% of the outstanding shares, have asked the Board to call for an EGM.
The agenda for this EGM is expected to include a proposal for electing new board members to reflect the ownership structure after the recent private placement, certain changes to the corporate structure, change of name and authorization related to issuance and acquisition of own shares.
The notice for EGM will be distributed in due course.
Status Badger tool
The Company is in the process of completing a strategic and technical review of the Badger tool and the Company’s IP.
The purpose of the assessment is to ensure that the Company makes the correct decisions with respect to maximizing the value of the tool and the IP.
The Company has engaged Rystad Energy AS to assist in this process. As previously communicated, the Company will also explore ways to obtain alternative funding for development of the tool and IPs.
It is the intention to transfer the Badger tool and other technologies to a wholly owned subsidiary of Badger.