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 positions the buyer as a global, capital-light oilfield equipment leader with a stronghold in the Middle East and diversified revenue streams.

• SPC's established relationships in Saudi Arabia and the U.A.E. provide immediate access to premier growth markets and diversify geographic revenue.

• Deep familiarity with SPC's operations and customers due to prior management experience enhances integration confidence.

• Substantial backlog exceeding $600 million as of December 31, 2024, offers greater revenue, earnings, and cash flow visibility.

• SPC's business aligns with acquisition criteria: strong growth potential, low capex, and variable cost structure.

Financial terms and conditions

• 65% stake acquired for $344.5 million, valuing SPC at $530 million enterprise value, with a 6.7x 2024 transaction-adjusted EBITDA multiple.

• Baker Hughes retains 35% of the JV, with put/call options exercisable after two years at a 6.0x trailing 12-month EBITDA, 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.

• Little to no net debt expected at closing due to strong cash position and anticipated cash generation.

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

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 from expanding corporate infrastructure to support global operations.