FMC Technologies Inc., the largest U.S. provider of subsea equipment to the oil and natural-gas industry, agreed to buy Pure Energy Services Ltd. for about C$282 million ($285 million) in cash to expand its hydraulic-fracturing services.
The C$11-a-share offer represents a 40 percent premium to Calgary-based Pure Energy’s closing price on Aug. 17, according to data compiled by Bloomberg. The shares climbed 40 percent to C$10.97 at the close in Toronto, the biggest gain in more than six years. FMC, based in Houston, fell 1.9 percent to $47.02 in New York.
Pure Energy provides drilling assistance to companies that use fracking to extract oil and gas from shale and other dense rock formations. FMC wants to expand its “shale-related businesses” and add to services provided by its surface-technologies segment, the company’s Chairman and Chief Executive Officer John Gremp said in a statement today.
FMC’s acquisition of a “land-focused company” is likely to cause investors and analysts to “question the rationale for the move,” Brian Uhlmer, a Houston-based analyst at Global Hunter Securities LLC, wrote today in a note to investors. “We are taking a cautious stance,” he wrote. Uhlmer rates the shares neutral, the equivalent to hold, according to data compiled by Bloomberg.
The global fracking-services market climbed 63 percent to $31 billion last year compared to 12 months earlier, according to a January report from industry consultant Spears & Associates. The U.S. and Canada are the world’s largest region for the work, with $27 billion in revenue last year, according to the report.
The transaction is expected to close in October, according to the statement.
AltaCorp Capital Inc. provided financial advice to Pure Energy, while Blake, Cassels & Graydon LLP acted as legal counsel. FMC’s financial adviser is Simmons & Company International. Stikeman Elliott LLP and Vinson & Elkins LLP gave FMC legal advice.