Current Price – $0.56
Acquisition Price - $0.6
Upside – 7%
Expiration Date – Q2 2018
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:
2) Both companies have overlapping customers:
3) Primoris has sufficient liquidity to finance the acquisition:
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”