Kodiak Gas Services to acquire CSI Compressco in $854M an all-equity transaction

Kodiak Gas Services announced that they have executed a definitive merger agreement under which Kodiak will acquire CSI Compressco in an all-equity transaction valued at approximately $854M, including the assumption of $619M of net debt, based on the closing price of Kodiak’s stock on December 18. The addition of CSI Compressco’s fleet will give Kodiak the largest contract compression fleet in the industry with 4.3M revenue-generating horsepower, while also extending Kodiak’s service offerings deeper into the natural gas value chain through CSI Compressco’s treating, gas cooling and aftermarket services businesses. Under the terms of the merger agreement, CSI Compressco unitholders will receive 0.086 shares of Kodiak common stock for each CSI Compressco common unit owned. The combined company will have an “Up-C” structure at closing, and CSI Compressco unitholders meeting certain requirements will have the ability to elect to receive 0.086 limited liability company units representing economic interests in Kodiak’s operating subsidiary for each CSI Compressco common unit they hold. Each such unit will be redeemable at the option of the holder for one share of Kodiak common stock, following a six month post-closing lock-up and subject to certain conditions. Upon closing, CSI Compressco unitholders will own approximately 14% of the combined company on a fully diluted basis. The transaction has been approved by the board of directors of Kodiak and the board of directors of CSI Compressco GP. Certain unitholders of CSI Compressco, including Spartan Energy Partners LP, which controls the CSI Compressco GP, Merced Capital LP and Orvieto Fund, that collectively own more than 50% of CSI Compressco’s outstanding units have entered into support agreements, pursuant to which they have agreed to vote their CSI Compressco units in favor of the merger upon effectiveness of the S-4 Registration Statement with the SEC. The transaction is expected to close in the second quarter of 2024, subject to certain regulatory approvals and other closing conditions, including Hart Scott Rodino Act clearance. Kodiak expects to launch a senior notes offering in the first quarter of 2024, the proceeds of which would ultimately be used to refinance CSI Compressco’s debt at closing of the acquisition.