Shares of Secure Energy Services Inc. were trading higher after news of an all-stock deal to buy its oil waste disposal rival Tervita Corp., the latest in a series of consolidation deals in the oil sector.
Secure is offering 1.2757 shares of common stock for every Tervita share in the friendly settlement between the Calgary-based companies that values Tervita at $478 million at Secure’s Monday closing price of $3.24.
Shares of Secure, however, rose 15.7% on Tuesday morning to $3.75, while shares of Tervita fell 7.3% to $4.29.
In a joint press release, the companies say the merger will result in a stronger midstream and environmental solutions business that will have a total enterprise value of approximately $2.3 billion.
They say it should deliver improved free cash flow on a larger scale and annual integration cost savings of about $75 million within 12 to 18 months.
Once completed, current Secure shareholders will own approximately 52% of the company.
“We believe the combination has significant strategic advantages for both companies, but the key thing to watch will be Competition Bureau approval given the significant ownership of third-party disposal facilities,” said Stiefel First Energy analyst Cole Pereira in a report.
The boards of both companies unanimously support the transaction, but it will also require a majority shareholder vote, as well as regulatory and court approvals, the companies said.
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