DNOW to acquire MRC Global
DNOW Inc. and MRC Global Inc. have entered into a definitive merger agreement in which DNOW will acquire MRC Global in an all-stock transaction valued at approximately $1.5 billion.
The combination brings together two global energy and industrial infrastructure organizations with a complementary portfolio of high-quality products, services and supply chain solutions and an expanded footprint of more than 350 service and distribution locations across more than 20 countries. By integrating both companies’ expertise in serving energy, gas utility and industrial customers, the combined company will have greater scale and deliver enhanced capabilities across the value chain.
“The combination of DNOW and MRC Global will create a premier energy and industrial solutions provider with a balanced portfolio of businesses and a diversified customer base fortifying long-term profitability and cash flow generation,” said DNOW President and CEO David Cherechinsky. “MRC Global’s differentiated product offerings and complementary assets strengthen DNOW’s 160-year legacy as a worldwide supplier of energy and industrial products and packaged, engineered process and production equipment. We look forward to welcoming the MRC Global family to DNOW and bringing our organizations together to drive enhanced growth and value for our customers, partners and shareholders.”
Rob Saltiel, MRC Global’s president and CEO, said, “Bringing our two companies together advances our shared goal of becoming a premier choice for energy, gas utility and industrial customers seeking exceptional service and solutions for the largest and most complex industry needs. The transaction diversifies our product offerings for our customers and de-risks our business. DNOW’s long-standing reputation, robust capabilities and broad global presence make it the ideal partner for MRC Global, as our two great companies continue to grow and compete in an expanding global market. Importantly, we have aligned corporate values and a shared commitment to delighting our customers through operational excellence and a culture of outstanding service. This is an exciting milestone for MRC Global, and I am grateful to our team members around the world whose dedication to our business and our customers continues to drive our success.”
Compelling Transaction Benefits
The combination of DNOW and MRC Global is expected to result in significant strategic, operational and financial benefits to shareholders, including:
Combines Highly Complementary Businesses. The combined company will offer distinctive and complementary products and services to the energy and industrial sectors across upstream, midstream, downstream, gas utility and industrial customers. The combined company is anticipated to have compelling and diverse growth opportunities and cash flow levers to reduce earnings volatility and enhanced resilience through business cyclicality in the energy sectors. Core to this will be serving a broader mix of customers in the construction and maintenance of essential energy process, production and transmission infrastructure. Additionally, the merger will allow for enhanced opportunities in alternative energy, artificial intelligence infrastructure, electrification, mining and other industrial markets.
Expands Scale and Scope. Together, the combined company will have an expanded geographic footprint and distribution presence in the U.S., Canada and attractive international markets, with approximately 5,000 team members. The expanded range of products and solutions are expected to strengthen existing customer and supplier relationships and facilitate the creation of new ones.
Unlocks Meaningful Synergies. The combined company is expected to generate $70 million of annual cost synergies within three years following closing through public company costs, corporate and IT systems, and operational and supply chain efficiencies. The combination is also expected to accelerate growth and deliver double digit Adjusted EPS accretion in the first year following closing.
Strong Cash Flow Generation. The substantial cash flow generation expected to result from the combination will enable the combined company to continue the execution of its capital allocation strategy, prioritizing organic investments in growth and productivity-enhancing technologies and investments that yield efficiencies and create value for customers. Maintaining a disciplined approach to capital allocation, the combined company expects to continue strategic acquisitions and return capital to shareholders.
Robust Balance Sheet to Pursue Further Growth. Following closing, the combined company is expected to maintain a strong balance sheet with a streamlined capital structure. Post-closing, DNOW expects net leverage to be under 0.5x. With strong cash flow and synergy realization, the combined company expects to achieve rapid deleveraging and have a net cash position by the end of the first year post closing. In addition to over $200 million of cash and a $500 million revolving credit facility, DNOW has secured commitments to expand its existing credit facility by $250 million at the close of the merger, further enhancing its liquidity and capital allocation flexibility.
Leadership, Corporate Governance and Headquarters
Upon completion of the transaction, Cherechinsky will serve as President and CEO of the combined company, and Mark Johnson, CFO of DNOW, will serve the same capcity for the combined company.
Following closing, DNOW’s board of directors will expand from eight to 10 directors to include two of MRC Global’s current independent board members. Dick Alario will continue to serve as chairman of the board.
The combined company will be named DNOW and trade on the NYSE under the DNOW ticker. The DNOW and MRC Global brands will continue following closing of the transaction. The combined company will remain headquartered in Houston, Texas.
INDUSTRIAL SUPPLY MAGAZINE
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