Aveda Transportation and Energy Services, a leading provider of oilfield hauling services and equipment rentals to the energy industry, recently signed an asset purchase agreement to acquire the operating assets of Williston, N.D.-based M&K Hotshot & Trucking and M&K Rig Service. Aveda expects to acquire approximately 170 pieces of oilfield hauling equipment, including 79 trailers, 15 conventional tractors, 14 winch trucks and three cranes, and approximately 395 pieces of rental equipment with an estimated total fair market value of $22.0 million, working capital estimated at $5.5 million and other intangible assets.
The initial purchase price is expected to be between $38.0 million and $42.0 million or 3.18 times 2013 EBITDA, which includes the issuance of $5.0 million in equity of Aveda at a price of $3.60 per share. An estimated $9.0 million in additional consideration may be payable on an earnout basis over a period of three years if certain EBITDA levels are generated.
"This transformational acquisition will provide Aveda with a strong presence in another established, oil-focused basin in the U.S.," said Kevin Roycraft, president and CEO of Aveda. "We expect to realize a number of synergies through the combination of Aveda's brand and operational platform and M&K's high-quality fleet and regional expertise that will help support future growth. This transaction also supports our entry into the U.S. rentals business and will provide opportunities to re-deploy under-utilized assets from the Western Canadian Sedimentary Basin to areas of more stable activity in the Williston Basin."
Between 2010 and 2012, M&K nearly tripled revenue from $11.6 million to $33.5 million and grew EBITDA from $3.1 million to $12.4 million. EBITDA margins between 2010 and 2012 ranged between 26.8 percent and 40.2 percent. Fiscal 2013 revenue is estimated to be between $39.0 million and $41.0 million and normalized EBITDA to fall in a range between $12.0 million and $13.0 million.
"Completing this acquisition essentially doubles the size of the company on an EBITDA basis, adding valuable scale, stability and further geographic diversity to our U.S. operations," said Bharat Mahajan, vice-president, finance and chief financial officer of Aveda. "The assets being acquired have a demonstrated track record of supporting solid margins and creating value in a region with continued robust activity levels."
Upon the transaction closing, former owners Mark and Kelly Brunelle will join the Aveda team along with current M&K management and nearly 90 staff to support ongoing operations and relationship continuity with key customers in the region.
The transaction is expected to close on or before Jan. 31, unless mutually extended by the parties. The transaction is subject to regulatory approval.
"Securing an increase in our senior credit facility offers us the financial flexibility to pursue additional acquisition opportunities in high activity jurisdictions on both sides of the border, leveraging the expanded scale of our operations," said Mahajan. "We continue to evaluate a range of acquisition and organic growth opportunities that will help drive long term shareholder value."
The company is actively pursuing a number of other acquisition opportunities along with several organic growth initiatives.
Aveda provides specialized transportation services and equipment required for the exploration, development and production of petroleum resources in the Western Canadian Sedimentary Basin and in the United States principally in and around the states of Texas and Pennsylvania. Aveda's rental operations include the rental of tanks, mats, pickers, light towers and other equipment necessary for oilfield operations.
Aveda was incorporated in 1994 as a private company to serve the oil and gas industry. It has major operations in Calgary, Slave Lake, Leduc and Sylvan Lake, Alberta; Mineral Wells, Pleasanton and Midland, Texas; Williamsport, Pa; and Buckhannon, W.V.