Hanover Compressor completes acquisition of assets from Schlumberger

Sep 04, 2001 02:00 AM

Hanover Compressor announced that it has completed its previously announced acquisition from Schlumberger of the Production Operators Corporation natural gas compression business, ownership interests in certain joint venture projects in South America and related assets for $ 761 mm.
Under the terms of the definitive agreement, Schlumberger received $ 270 mm in cash, $ 150 mm in a long-term subordinated note and 8,707,693 shares of newly issued restricted Hanover common stock having a nominal value of $ 283 mm, based on $ 32.50 per share value of Hanover common stock.

Additionally, under the terms of the agreement, Schlumberger is entitled to receive a distribution of up to $ 58 mm upon the occurrence of certain events relating to one of the joint ventures acquired by Hanover in the transaction. Hanover management reconfirmed its belief that the transaction will add annual revenue and EBITDA of at least $ 200 mm and $ 90 mm, respectively, within one year.
As a part of a five-year allianceagreement between the companies, Schlumberger has agreed to hold its ownership stake in Hanover for at least three years. In addition, Hanover has agreed to add to its board of directors, a senior executive of Schlumberger. The initial designee is Rene Huck, President of Reservoir Evaluation and Development for Schlumberger Oilfield Services.

The transaction considerably enhances Hanover's position in the global compression services and gas handling industry, significantly extends its reach and anticipated growth in large, newly opened markets overseas, and adds approximately 900,000 horsepower to its compression fleet and an additional 800,000 horsepower through the South American joint ventures.
"We are extremely excited to complete this transaction, which represents a critical step in our long-term plan to meaningfully extend our position, customer relationships and organizational capabilities as the world-wide natural gas compression and treating services leader," said Michael J. McGhan, Hanover's President and CEO.
"The industry is growing rapidly as the demand for energy accelerates. The increasing demand for our services, together with the infrastructure we now have in place to serve our market, places Hanover Compressor in an exceptional position to meet our customers needs and further enhance shareholder value. We believe this accretive multi-faceted transaction will generate strong revenue growth for Hanover over the next five years."

Mr. McGhan noted that given Production Operators is one of the founders of the gas compression industry, a leading and well respected force in exporting outsourced compression services to international markets, and the training ground of many of Hanover's own executives, integration was well underway and should be seamless. "Like Hanover, Production Operators has built productive relationships with many outstanding energy producers, processors and transporters through the excellent broad-based service it provides, and we will work together to do what is necessary to enhance and strengthen those relationships," he said.
Under the terms of the agreement, Hanover acquired 100 % of the gas compression business of Schlumberger, comprised of Production Operators Corporation, ownership interests in certain natural gas compression and gas handling joint venture projects in South America, as well as other related assets of Schlumberger. The terms of the related alliance will continue to allow Schlumberger to offer world-class gas compression products and services to its customers through a key market supplier, while Hanover will benefit from the global presence and infrastructure of Schlumberger in its efforts to penetrate new markets.

Under the terms of the agreement, Schlumberger will hold its Hanover stock for at least three years after the date of closing, and will not acquire more than 25 % of Hanover during this period. For the period of five years following the closing date, as long as Schlumberger maintains at least 5 % ownership of Hanover, Schlumberger will have one seat on Hanover's board of directors.
Hanover used proceeds from a recently completed sale and leaseback transaction, details of which were announced on August 17, 2001, to support its $ 270 mm cash payment to Schlumberger.
Hanover was advised on the transaction by J.P. Morgan Securities, Goldman Sachs & Company, and GKH Partners.

Source: Hanover Compressor Company
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