Cactus(US:WHD)2025-06-02 16:00Summary of Cactus (WHD) M&A Announcement Conference Call Company and Industry - Company: Cactus, Inc. (WHD) - Industry: Oilfield Equipment and Services - Acquisition Target: Baker Hughes Surface Pressure Control (SPC) business Core Points and Arguments 1. Acquisition Announcement: Cactus announced the acquisition of a 65% controlling stake in Baker Hughes' SPC business for approximately $344.5 million, establishing a joint venture with Baker Hughes [6][12][10] 2. Strategic Rationale: The acquisition aims to create a global, capital-light oilfield equipment company, enhancing Cactus's geographic presence, particularly in the Mideast, a key growth market for oilfield services [6][10][8] 3. Financial Metrics: The transaction values the SPC business at approximately $530 million, with a purchase price representing a multiple of about 6.7x 2024 transaction-adjusted EBITDA [12][10] 4. Revenue and Market Presence: SPC generated nearly $500 million in revenue in 2024, with 85% of its revenue coming from the Mideast. The business has a strong backlog exceeding $600 million, indicating stable revenue potential [16][18][10] 5. Operational Synergies: Cactus expects to achieve approximately $10 million in annual cost synergies within one year post-acquisition, despite initial dis-synergies due to corporate infrastructure expansion [14][15] 6. Market Dynamics: Cactus aims to leverage its existing knowledge and relationships to enhance SPC's performance and capture market share in the Mideast, where it currently faces competition from major players like Schlumberger [48][50][49] 7. Long-term Strategy: The acquisition is seen as a pathway to expand Cactus's international footprint, with plans to pursue opportunities beyond the Mideast while maintaining a strong U.S. presence [53][52] Other Important Content 1. Risk Factors: The call included a disclaimer regarding forward-looking statements and the inherent risks associated with such projections [4][3] 2. Financial Flexibility: Cactus plans to maintain a conservative balance sheet and significant financial flexibility post-acquisition, with little to no net debt anticipated at closing [14][10] 3. Cultural Integration: Cactus emphasizes the importance of instilling its operational excellence culture within SPC to drive performance improvements [26][57] 4. Market Share Potential: There is significant room for market share growth in the Mideast, particularly in Saudi Arabia and Oman, where Cactus sees opportunities to improve SPC's competitive position [48][49] 5. Aftermarket Services: Over 30% of SPC's revenue comes from aftermarket services, providing a stable revenue stream that is less dependent on new drilling activities [18][16] This summary encapsulates the key points discussed during the conference call regarding Cactus's acquisition of Baker Hughes' SPC business, highlighting the strategic, financial, and operational implications of the deal.