Oil States will acquire all of the ordinary shares of The MAC, a leading provider of remote accommodations for the natural resources industry in Australia. Oil States and The MAC intend to complete the transaction through a Scheme of Arrangement (the "Scheme") under the Corporations Act of Australia.
Under the terms of the Scheme, each shareholder of The MAC will receive A$3.90 per share in cash, which will be reduced by any dividends declared or paid subsequent to October 15, 2010. This offer price represents a total diluted equity value of A$651 million. The price represents a premium of 16% to the closing price of A$3.35 on October 14, 2010, the last trading price before announcement of the transaction and a premium of 22% to the 30 day volume weighted average price. The Board of The MAC unanimously recommends that The MAC shareholders vote their shares in favor of the Scheme. Oil States expects the transaction to close by the end of the first quarter of 2011 and to be accretive to earnings in 2011, excluding one-time transaction costs.
"Our planned acquisition of The MAC Group will significantly expand our existing accommodations business and will strategically position Oil States in the growing Australian resource market," stated Cindy B. Taylor, Oil States' president and chief executive officer. "The MAC has a strong base of existing operations with six villages totaling close to 5,000 rooms. With five of its villages operating in Queensland, Australia, The MAC serves some of the most active metallurgical coal producers in the Bowen Basin. These mines primarily produce for the export markets of Japan, China and Korea. In addition, The MAC has targeted future sites in New South Wales and Western Australia in regions that support coal, gold, iron ore and LNG developments."
"The combination of our accommodations business with The MAC creates a leading, global remote-site accommodations provider with significant growth opportunities serving customers across a broad range of resources and geographic regions. We have been highly impressed with The MAC and believe it is a clear leader in third-party provided accommodations in Australia. We see many similarities in the way The MAC approaches their business in the areas of guest service, integrated operations and contracting to the way we approach our business. Our planned combination with The MAC will allow us to support over 11,000 workers a day in our lodges and villages with plans to grow room capacity to over 14,000 rooms by this time next year. We look forward to welcoming the dedicated employees of The MAC to Oil States and continuing to build upon their legacy of growth and success."
Oil States intends to fund the acquisition with cash on hand and borrowings available under a new five-year, $900 million senior secured bank facility. Oil States entered into a commitment letter with Wells Fargo Bank, N.A. and its affiliates to provide this facility which, subject to final syndication, is expected to consist of revolving credit facilities in both the U.S. and Canada aggregating $600 million as well as funded term debt in both the U.S. and Canada totaling $300 million. The revolving credit facility and funded term debt are expected to have higher interest rates consistent with current market conditions but otherwise have materially similar terms and covenants to Oil States existing credit facility. The commitment letter is subject to terms and conditions typical for such committed, acquisition financings.
Marley Holdings Pty Ltd ("Marley"), as trustee for The Maloney Family Trust (a 52% shareholder in The MAC), has granted an option over a portion of its holding in The MAC to Oil States representing 19.9% of the total issued capital of The MAC. The option will be filed with the ASX in due course.
The transaction is subject to certain conditions precedent including approvals from the shareholders of The MAC, the court approval of the Scheme and other regulatory approvals. A copy of the executed Scheme Implementation Deed entered into by The MAC and Oil States will be filed by Oil States with the SEC under Form 8-K.
Lazard Freres & Co. LLC and Lazard Pty Limited are acting as financial advisors to Oil States; and Vinson & Elkins LLP and Mallesons Stephen Jaques are acting as legal advisors to Oil States.
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