Canyon Services Group (TSX:FRC, Stock Forum) has made a serious move to grow its hydraulic fracturing and well-stimulation services business as the company announced today that it had entered into a pre-acquisition agreement where the company has agreed to purchase Fraction Energy Services for a total consideration, including the assumption of debt, of approximately $101.7 million.
Fraction is a privately held leading water and fracturing fluid logistics, containment, transfer and storage management company providing services to customers in northeast British Columbia and northwest Alberta, with field offices in Fort St. John, British Columbia and Grande Prairie, Alberta.
According to the news release, the transaction, expected to close July 1, 2014, calls for Canyon to issue 5.4 million common shares in exchange for 22.5 million Fraction common shares with all outstanding options to acquire Fraction shares to be settled in cash, totaling an estimated $4.9 million as well as the company assuming approximately $3.5 million net Fracture debt and $4.6 million in positive working capital.
Fracture has a agreed to a three-year escrow where 25% of the Canyon shares will be freely tradeable upon closing while the remaining 75% to be release equally on the first, second and third anniversary of the transaction's closing.
Company president and CEO, Brad Fedora, commented, “Fraction represents the first step in Canyon's long-term strategy of developing comprehensive service solutions for water and fracturing fluid management.”
He went on to explain, “As Canyon continues to align with customers developing large scale projects in the deep basin requiring larger fracturing treatments, more comprehensive fracturing fluid management will become vital.”
Then he finally concluded, “The transaction is very accretive on a cash flow and earnings basis and we believe Fraction provides us with a complementary division that we can grow concurrently with our existing operations.”
Canyon was in the news recently when the company announced its annual meeting results at the end of May.
Shares climbed 6.54% on the news to $18.40 per share.
Currently there are 62.9m outstanding shares with a market cap of $1.2 billion.