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Oilfield Services Firms Keane, C&J Merge

June 17, 2019

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Oilfield services company Keane Group Inc said on Monday it will merge with rival C&J Energy Services in a $745.7 million all-stock deal, as it looks for scale amid spending cuts by crude producers.

The oil service sector has been battling lower demand and pricing pressure as U.S. producers hold off drilling new wells on investor demand that cash be used for dividends and buybacks rather than growth.

The deal is expected to add to cash flow immediately, the companies said in a statement, adding they see annualized run-rate cost savings of $100 million within 12 months after closing.

The combined company, with about 2.3 million hydraulic fracturing horsepower, will be the third largest pressure pumper in the United States behind Schlumberger NV and Halliburton Co.

The companies said the deal is valued at $1.8 billion, including $255 million of net debt.

Keane's offer values C&J at $11.29 per share, according to Reuters' calculation, a 5.3% premium to stock's close on Friday.

C&J shareholders will get 1.6149 Keane shares for each share held and a dividend of $1 per share before the deal closes.

Upon closing, expected in the fourth quarter, shareholders of both companies will hold 50% each of the combined entity, which on a pro-forma basis would have generated $4.2 billion in net revenue for the year ended March 31, 2019, the companies said.

C&J Chairman Patrick Murray will serve as the chairman and Keane's Chief Executive Officer Robert Drummond will be the CEO of the new company that will get its name prior to the deal closing.

The Houston-headquartered company will have a board size of 12, with 6 directors each from C&J and Keane.

Reuters had reported earlier on Monday that the two companies are set to merge.

Morgan Stanley & Co LLC and JP Morgan Securities LLC were financial advisers to C&J, while Citi was to Keane. Lazard was financial adviser to the special committee of the Keane board.

(Reporting by Debroop Roy in Bengaluru; Editing by Shinjini Ganguli)

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