Kodiak Gas Services (KGS) M&A announcement summary

Deal rationale and strategic fit

• Acquisition of Distributed Power Solutions (DPS) for $675 million expands offerings into high-growth markets like data centers, microgrids, and oil and gas, leveraging a premium 384 MW fleet of Caterpillar-powered distributed generation equipment.

• Enhances customer reach with contracted cash flows and increases the duration of contracted revenue streams, supporting organic growth.

• DPS management team joins, bringing deep distributed power experience and commercial relationships.

• Entry into distributed power aligns with surging U.S. power demand, especially from data centers and industrial sectors requiring on-site, permanent power solutions.

• The acquisition is a natural fit for the workforce, culture, and customer base, enhancing ability to deliver critical energy infrastructure.

Financial terms and conditions

• Transaction valued at $675 million, including $575 million in cash from an ABL facility and $100 million in stock to sellers, representing about 3% post-close ownership.

• Total transaction cost is approximately $690 million, including fees and expenses.

• Valuation is about 7.4x expected 2026 adjusted EBITDA for DPS and is expected to be immediately accretive to earnings and cash flow per share.

• Pro forma leverage expected at 3.5x–4.0x post-closing, with over $800 million ABL facility availability.

• Purchase price subject to customary adjustments per the agreement.

Synergies and expected cost savings

• Significant operational synergies expected from cross-training over 700 Caterpillar-certified technicians and leveraging scalable AI/machine learning technology across both power and compression segments.

• Shared inventory and parts for reciprocating engines used in both businesses enhance efficiency.

• Enhanced buying power with Caterpillar anticipated due to increased scale.

• Integration expected to enhance reliability and real-time monitoring of the combined fleet using advanced technologies.

• Anticipated extension of contract portfolio life through long-term distributed power contracts.