Sentinel Energy Services Announces Combination with Strike Capital
SENTINEL ANNOUNCES FRIDAY MORNING, NOT AFTERNOON…A GOOD SIGN?
Sentinel Energy Services announced this morning it has entered into a definitive agreement to acquire a majority interest in Strike Capital LLC (“Strike Capital”), which owns and operates Strike LLC (“Strike”), a leading North America infrastructure and integrity services and projects business.
Founded in 2003 by Chief Executive Officer Steve Pate and his partners, Strike LLC is a provider of full life cycle pipeline infrastructure services, including new construction, make-ready, testing, inspection, maintenance, repairs, rehabilitation, upgrades, facility construction and reconnection. Strike operates in most major energy markets and has a scalable platform with a track record of consistent growth across oil and natural gas cycles. From the period 2007-2017, Strike generated compound annual revenue growth of more than 35 percent with estimated 2018 revenues of $1.8 billion.
Sentinel has also obtained commitments for a $150 million PIPE investment at $10 per share, including a cash commitment of $110 million by Fidelity Management and Research Company and $40 million investment by Sentinel’s sponsor, CSL Capital Management L.P. and certain of its investment funds, comprising a cash commitment of $22 million and the contribution of a mid-stream pipeline services business, Invacor, valued at $18 million.
Cash proceeds from the business combination, including the PIPE investment, is expected to be up to $477 million and will be utilized to pay $124 million to existing shareholders with the remaining available cash being available to pay off the existing term loan and revolver facilities in their entirety.
- Anticipated initial enterprise value of $854 million
- Strike Inc. represents the largest, pure-play pipeline and facilities infrastructure and integrity services provider across U.S. onshore energy markets and transmission corridors
- Following the business combination, Sentinel will be led by the existing management team of Strike. Andrew Gould and Krishna Shivram will be on the Board of Directors.
- Secured a $150 million PIPE commitment at $10 per share, including $110 million from Fidelity Management and Research Company and $40 million from the sponsor, CSL Capital Management, L.P.
- Strike estimated 2018 revenue of $1.8 billion and estimated 2018 adjusted EBITDA of $134 million
- Entry multiples at 6.3x 2018 projected adjusted EBITDA and 5.4x 2019 projected adjusted EBITDA
- 5.4x 2019 projected adjusted EBITDA, implying a discount of approximately 32% to publicly traded peers
- Strike: 35+% 10 year revenue growth for the periods of 2007-2017
- $124.4 million in cash
- 30.6 million shares of common stock of the Company
INVESTOR CONFERENCE CALL
At 9 a.m. Central Time on Friday, October 19, 2018, Sentinel will be holding an investor conference call to discuss the transaction.
Domestic toll-free access number: 1-877-523-5612
International toll-free access number: 1-201-689-8483
Participant code: 26027042#
A replay of the call will also be available from 9 a.m. Central Time on October 19, 2018 to 11:59 p.m. Central Time on March 30, 2019. To access the replay, please use the toll-free numbers and code indicated above.
- Citigroup Global Markets Inc. acted as sole private placement agent, financial advisor and capital markets advisor to Sentinel.
- Winston & Strawn LLP acted as legal counsel to Sentinel.
- J.P. Morgan Securities LLC acted as financial advisor to Strike
- Jones Day acted as legal counsel to Strike.