Independence Contract Drilling (ICD) and Sidewinder Drilling have jointly announced their entry into a definitive merger agreement pursuant to which ICD will acquire all of the outstanding equity interests in Sidewinder.
The merger will combine two pad-optimal drilling fleets and operations focused on the Permian Basin, Haynesville region and other basins in Texas and its contiguous states.
Upon closing of the transaction, ICD will more than double the size of its pad-optimal rig fleet to 34 rigs, following modest upgrades to five Sidewinder rigs. ICD expects to achieve synergies in excess of $8 million and believes the acquisition will be accretive to earnings per share, EBITDA per share and cash flow per share. The transaction is subject to customary regulatory approvals, approval by ICD’s stockholders of the issuance of the ICD common stock in the merger transaction and other customary closing conditions. The transaction is expected to close early in Q4 2018.
Under the terms of the transaction, the Sidewinder unit holders will receive an aggregate of 36,752,657 shares of ICD common stock, representing approximately 49% of the total outstanding shares, immediately following the closing of the transaction. ICD also will assume an estimated $50 million of Sidewinder net debt at closing.
Contemporaneously with the signing of the merger agreement, ICD has received binding commitments for a $130 million, secured, 5-year-non-amortizing term loan and a $40 million revolving credit facility, both to be entered into at the closing of the transaction. Proceeds from the term loan will be used to refinance both ICD’s existing debt and the Sidewinder debt assumed in the transaction.
The combined company’s board of directors will consist of four existing ICD board members, including ICD’s Chairman of the Board, Thomas R. Bates, as well as two members appointed by the controlling owners of Sidewinder. The combined company’s management team will be led by Anthony Gallegos, Sidewinder’s current President & Chief Executive Officer, who also will serve as a director of the combined company, and Philip Choyce, ICD’s current Executive Vice President & Chief Financial Officer.
The merger agreement and merger have been unanimously approved by the boards of directors of both companies and have received the requisite approval of the unit holders of Sidewinder.
“The benefits to ICD of this combination are significant and the industrial and geographic fit is obvious. We expect to gain significant size and scale, expand growth opportunities and realize significant synergies. We also expect to strengthen our cash flows and balance sheet, add operational expertise and capabilities, and create significant opportunities to market additional rigs into our expanding customer base,” Byron Dunn, President and Chief Executive Officer of ICD said.
“We are excited to align ourselves with ICD. Not only are our fleets and operations complementary, but we share a common focus and commitment to safety, operational excellence and customer service,” Mr Gallegos said. “Through the combination of our operations and premier assets strategically located in North America’s most active basins, I believe we have compelling opportunities for operational synergies and growth as well as career advancement for the employees of both companies. I look forward to working with the board, management team and the collective employees as we navigate the combined company into its next chapter.”