Cactus (WHD) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of a 65% controlling stake in Baker Hughes' Surface Pressure Control (SPC) business accelerates international expansion, especially in the Middle East, diversifies revenue streams, and enhances geographic stability.

• SPC's capital-light, high-return business model and direct-to-end-user sales align with acquisition criteria and support global presence.

• Management's familiarity with SPC assets and markets provides integration advantages and operational confidence.

• Partnership with Baker Hughes supports transition of key services and customer relationships, especially with NOCs and IOCs.

• Substantial backlog (over $600 million as of Dec 31, 2024) offers greater revenue, earnings, and cash flow visibility.

Financial terms and conditions

• 65% stake acquired for $344.5 million, implying a $530 million enterprise value and a 6.7x 2024 transaction-adjusted EBITDA multiple.

• Baker Hughes retains 35% of the JV, with a put-call option exercisable after two years at a 6.0x trailing 12-month EBITDA multiple, capped at $660 million.

• Upfront payment funded by cash on hand and a $225 million undrawn revolver; JV capitalized with $70 million operating cash at close.

• Cactus may purchase the remaining 35% after the second anniversary of closing.

• Little to no net debt expected at closing due to strong cash position; potential for additional debt financing.

Synergies and expected cost savings

• Approximately $10 million in annual cost synergies projected within one year post-closing, with further improvements expected as integration progresses.

• Cactus expects to enhance supply chain efficiency and leverage its global low-cost manufacturing footprint.

• Some initial dis-synergies anticipated due to expanded corporate infrastructure.