Willbros Group (WGRP) – Merger Arbitrage – 7% Upside

Current Price – $0.56

Acquisition Price – $0.6

Upside – 7%

Expiration Date – Q2 2018

Merger Agreement

This idea was shared by Thinley.

 

Primoris Services Corporation (PRIM) is acquiring Willbros Group (WGRP) in an all cash transaction at $0.60 per WGRP share and settlement all of the existing Willbros debt obligations, for an enterprise value of approximately $100 million. This leaves 5%-7% spread relative to current WGRP prices.

  • There are no financing conditions. Primoris intends to finance the transaction through cash on hand and its existing credit facilities.
  • As part of the transaction, Primoris has agreed to provide Willbros up to $20 million in secured bridge financing to support Willbros’ working capital liquidity needs prior to the transaction close.
  • Willbros directors and stockholders, together representing approximately 17% of Willbros’ outstanding shares, have agreed to vote in favor of merger.
  • Merger has been unanimously approved by the Boards of Directors of both Willbros and Primoris.
  • The transaction is still subject to approval by Willbros stockholders and certain other closing conditions.
  • The offer is 275% above the unaffected price of $0.16 – so downside risk is considerable.
  • Large termination fee of $4.3-$8 million if deal is terminated by WGRP.
  • The transaction is expected to close in Q2 2018.

 

Reasons why the merger should close

1) Strategically, there are a lot of synergies and the merger makes sense for Primoris. From presentation:

Screen Shot 04-13-18 at 01.55 PM

2) Both companies have overlapping customers:

Screen Shot 04-13-18 at 01.54 PM

3) Primoris has sufficient liquidity to finance the acquisition:

Screen Shot 04-13-18 at 01.55 PM 001

4) Willbros shareholders are likely to vote in favor of the merger as otherwise the company would be forced to seek bankruptcy.

“Primoris’ all-cash proposal was determined by the Board to represent near-term, substantially higher value and certainty to Willbros’ stockholders relative to Willbros’ prospects as a standalone company, and, in this context, the substantial likelihood that, as an independent company, Willbros, given its financial condition, including short and long-term liquidity and business and earnings prospects, would need to seek immediate protection under U.S. bankruptcy laws and the Company’s stockholders would likely receive nothing in the bankruptcy reorganization process in the event the merger agreement was not entered into and the merger not completed”

6 COMMENTS

  1. dt

    From the merger doc termination fee seems to apply only to Willbros. So if Primoris decides to walk away, they can do this without penalty.

  2. Alex15

    I don’t think they would give Willbros a brdige loan of 20m (even if secured) if walking away would be a serious consideration. Given that the buyer knows Willbros and the industry quite well and the deal is expected to close in q2, there shouldn’t be any concerns in my mind. Of course anything can happen (see Akorn) in M&A.
    I have to admit, I am not sure why they will pay such a high premium for a company that is on brink of bankrupcy.
    @Thinley thanks for sharing. Do you know when the date for the voting will be announced?

  3. Alex15

    The Board of Directors (the “Board”) of Willbros Group, Inc. (“Willbros”) has unanimously approved a merger agreement (as it may be amended from time to time, the “merger agreement”) providing for Willbros to be acquired by Primoris Services Corporation (“Primoris”). You are cordially invited to attend a special meeting of Willbros stockholders to be held at 9:00 a.m., local time, on May 31, 2018, at the Conference Center at Post Oak, 4400 Post Oak Parkway, Suite 240, Houston, Texas 77027.

  4. dt

    Spread has narrowed to minimum and meeting is scheduled for tomorrow.

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