On June 30, 2010, Canadian Energy Services & Technology Corp. (“CESTC”) through its wholly owned indirect subsidiary, AES Drilling Fluids, LLC (“AES”), acquired all of the drilling fluids business assets of Fluids Management II, Ltd. (“FMI”) and certain additional assets related to FMI from two affiliates of FMI, Brookshire Investment Trust and Stikley Enterprises, Inc. The total purchase price, excluding transaction costs, was approximately US$65 million, including a US$5 million earn-out, cash consideration of US$40.5 million and the issuance of 1,289,370 common shares of CESTC to FMI. The US$5 million earn-out is payable upon the FMI division achieving an EBITDA target of US$9.5 million for the 12-month period post closing of the FMI acquisition. The common shares issued to FMI are subject to escrow provisions, with one-third of the escrowed shares being released, subject to industry standard exceptions, including a change of control of CESTC or AES, on each of the first, second and third anniversaries after closing of the FMI acquisition.
On July 13, 2010, CESTC completed an offering of 2,905,000 Subscription Receipts at $15.50 per Subscription Receipt for gross proceeds of $45,027,500. The net proceeds from the sale of the Subscription Receipts were used to repay indebtedness incurred in connection with the FMI acquisition, including US$40 million drawn on the bank financing to initially finance the cash portion of the purchase price of the FMI acquisition, pay the expenses related to the offering and general corporate purposes.
CESTC was represented by the Calgary office of Blake, Cassels & Graydon LLP, with a team that included Scott Cochlan, Janan Paskaran and Dana Hnatiuk (securities); and on US matters by James Larimore of Crowe & Dunlevy.
FMI was represented by G. Walter Rockwell of Houston, Texas.
The financing was completed through an underwriting syndicate led by Cormark Securities Inc. and including Thomas Weisel Partners Canada Inc. (now Stifel Nicolaus), FirstEnergy Capital Corp., RBC Dominion Securities Inc., Wellington West Capital Markets Inc., HSBC Securities (Canada) Inc. and Paradigm Capital Inc. Burstall Winger LLP represented the syndicate of underwriters, with a team that included Harley Winger, Robert Verbuck, Benjamin Rootman and John Davidson (corporate/securities).