DOVER ANNOUNCES
PLAN TO SPIN OFF WELLSITE BUSINESS INTO INDUSTRY-LEADING PUBLIC
COMPANY
-
Expects Wellsite spin-off will be completed no
later than the second quarter of 2018
-
Anticipates share repurchases in 2018 of $1
billion, including use of cash from the Wellsite dividend
-
Names Sivasankaran ("Soma") Somasundaram
President and Chief Executive Officer of Wellsite business
-
Expands Dover rightsizing initiatives, which are
now estimated to deliver $50 million in savings in 2018
DOWNERS GROVE,
Ill., December 7, 2017 - Dover (NYSE: DOV) today announced that
it plans to spin off its upstream energy businesses within the
Dover Energy segment, collectively, the "Wellsite" business, into a
standalone, publicly-traded company, to be named at a later date.
The plan to pursue a tax-free spin-off of Wellsite concludes
Dover's strategic alternatives review of Wellsite announced on
September 12, 2017, and is the culmination of a comprehensive
process to determine the best separation alternative to maximize
shareholder value.
Upon completion of the spin-off,
Wellsite will be a leading provider of a full range of oil and gas
production technologies and solutions, wellsite productivity
software and IIoT solutions. Wellsite will also be the industry
leader in the development and production of polycrystalline diamond
cutters used for oil and gas exploration. Wellsite serves many of
the most attractive segments in the oil and gas industry with its
portfolio of leading brands including Norris,
Harbison-Fischer, Accelerated, PCS Ferguson,
Norriseal-Wellmark, Spirit, Quartzdyne,
Windrock and USS.
For 2017, on a pro-forma basis,
Wellsite is expected to generate approximately $1 billion in annual
revenue and EBITDA of approximately $250 million, which does not
include restructuring costs and estimated public company expenses
of approximately $35 million. Production and Automation
Technologies, which comprises Dover Artificial Lift and Dover
Energy Automation, accounts for roughly 80% of Wellsite's total
revenue, while Drilling Technologies, encompassing US Synthetic, is
about 20% of revenue.
As part of the spin-off
transaction, Wellsite is expected to raise $700 to $800 million of
new debt, the proceeds of which will be paid to Dover in the form
of a dividend. Upon completion of the spin-off transaction, it is
expected that Wellsite's strong balance sheet and free cash flow
will provide the company with ample financial flexibility. With
respect to the Wellsite dividend, Dover anticipates returning the
proceeds to shareholders as the primary source of funding for its
$1 billion of share repurchases to be completed in 2018.
Robert A. Livingston, Dover's
President and Chief Executive Officer, said, "Today's announcement
marks an important step forward in Dover's transformation and
continues our strategy of narrowing our focus and investing in our
core businesses to deliver long-term shareholder value."
Mr. Livingston continued, "The
spin-off creates a strong new company poised to excel in the
upstream oil and gas markets, with particular strength in U.S.
shale basins. Wellsite has world-class businesses and is known for
its differentiated technology, leading brands and superior customer
service. As a standalone public company, we believe Wellsite will
be attractive to its new investor base given its strong value
proposition, ability to pursue a tailored strategy, and financial
metrics consistent with the most premium companies in its oilfield
equipment peer group."
Upon completion of this
transaction, Dover's core platforms, which compete in lower
volatility industrial markets, will be well-positioned to provide a
strong foundation for reinvestment, long-term sustainable revenue
and earnings growth and strong free cash flow generation. Dover's
annual revenue following the completion of this transaction will be
approximately $6.8 billion on a pro-forma basis for 2017.
Mr. Livingston continued, "Looking
ahead, we expect Dover will have a business mix that offers greater
consistency, plus the opportunity to continuously improve margins
and pursue a more focused growth strategy. As we think about our
capital allocation strategy upon completing the spin-off, we expect
to invest to drive organic growth and make add-on strategic
acquisitions in our core business platforms as part of a
disciplined capital allocation framework focused on growth, while
consistently returning capital to our shareholders through
dividends and share repurchases."
Wellsite Leadership
Dover announced today that
Sivasankaran ("Soma") Somasundaram, President and Chief Executive
Officer of the Dover Energy segment, will become President and
Chief Executive Officer of Wellsite upon completion of the
transaction. Mr. Somasundaram has 14 years of experience at Dover
and has served in his current role since 2013.
"Soma has a deep understanding of
Wellsite's operations and the oil and gas industry. The Board and I
are confident he is the right executive to lead Wellsite as a
standalone, publicly-traded company," said Mr. Livingston.
Transaction Details
Dover anticipates that the
transaction will be in the form of a distribution of 100% of the
stock of Wellsite, a new, independent, publicly-traded company,
which will be tax-free to Dover and U.S. shareholders for U.S.
federal income tax purposes.
Dover currently expects that the
transaction will be completed no later than the second quarter of
2018. Completion of the transaction is subject to certain customary
conditions, including, among others, assurance that the spin-off of
Wellsite will be tax-free to Dover and U.S. shareholders, the
effectiveness of appropriate filings with the U.S. Securities and
Exchange Commission and final approval by Dover's Board of
Directors.
Rightsizing Initiatives
The Company also announced that it
is expanding the scope of its previously announced Dover
rightsizing initiatives. The anticipated 2018 benefits, before
associated costs, of these actions are estimated to be $50 million,
up $10 million from the Company's previous forecast. These
initiatives primarily relate to headcount reductions and facility
closures and consolidations as the Company focuses on reducing its
cost structure in preparation for the spin-off of Wellsite. Dover
now expects charges related to its rightsizing initiatives and
other costs to be in the range of $60 million to $65 million, with
the majority of the costs to be realized in the fourth quarter of
2017.
Advisors
Lazard and Centerview Partners are acting as
financial advisors to Dover, and Simpson Thacher & Bartlett LLP
and McDermott Will & Emery LLP are acting as legal counsel.
About Dover
Dover is a diversified global
manufacturer with annual revenue exceeding $7 billion. We deliver
innovative equipment and components, specialty systems, consumable
supplies, software and digital solutions and support services
through four operating segments: Engineered Systems, Fluids,
Refrigeration & Food Equipment and Energy. Dover combines
global scale with operational agility to lead the markets we serve.
Recognized for our entrepreneurial approach for over 60 years, our
team of 29,000 employees takes an ownership mindset, collaborating
with customers to redefine what's possible. Headquartered in
Downers Grove, Illinois, Dover trades on the New York Stock
Exchange under "DOV." Additional information is available at
dovercorporation.com.
About Wellsite
Wellsite is a leading provider of
highly engineered technologies that help companies drill for and
produce oil and gas efficiently and safely around the world. Our
products include a full range of equipment essential to efficient
functioning throughout the lifecycle of a well - from drilling to
completion to production. The company's principal products consist
of artificial lift equipment and solutions, including rod pumping
systems, electric submersible pump systems, progressive cavity
pumps and drive systems and plunger lifts, as well as
polycrystalline diamond cutters for drilling. We also provide a
full automation offering consisting of equipment, software, and
IIoT solutions for downhole monitoring, wellsite productivity
enhancement and asset integrity management.
Forward-Looking
Statements
Dover makes information available
to the public, orally and in writing, which may use words like
"anticipates," "expects," "believes," "indicates," "suggests,"
"will," "plans" and "should," which are "forward-looking
statements" under the Private Securities Litigation Reform Act of
1995. These statements include, but are not limited to, statements
related to the intended spin-off, its anticipated benefits and
other non-historical statements. Dover refers you to the documents
that it files from time to time with the Securities and Exchange
Commission, such as its reports on Form 10-K, Form 10-Q and Form
8-K, for a discussion of risks and uncertainties that could cause
its actual results to differ materially from its current
expectations and from the forward-looking statements contained in
this press release. Dover undertakes no obligation to update any
forward-looking statement. Projected pro forma information included
in this press release is based on various assumptions, including
with regard to the nature and amount of incremental costs that will
be incurred by Wellsite as an independent public company and the
nature and amount of debt to be incurred by Wellsite pursuant to
certain financing transactions expected to be completed in
connection with the spin-off. The assumptions underlying the
projected pro forma information are subject to various risks and
uncertainties, including, among others: risks inherent to the
industries in which Dover and Wellsite compete; macroeconomic
factors beyond the control of Dover and Wellsite; and risks related
to Dover's proposed spin-off and related transactions, including
financing transactions. Any of these risks and uncertainties, as
well as the additional risk factors described in Dover's Annual
Report on Form 10-K for the fiscal year ended December 31, 2016, as
such factors may be updated from time to time in subsequent filings
with the SEC, could cause actual outcomes or results to differ
materially from those indicated by the projected information in
this press release.
Non-GAAP Financial
Measures
This press release includes
Wellsite's projected pro forma EBITDA, or earnings before interest,
taxes, depreciation and amortization before public company
expenses, a measure that is not defined under accounting principles
generally accepted in the United States of America ("GAAP"). A
reconciliation of this non-GAAP measure to the most closely
comparable measure calculated in accordance with GAAP is not
available without unreasonable effort due to the unavailability of
certain information needed to calculate certain reconciling items,
including interest expense and income tax expense.
Investor
Contact
Paul
Goldberg
Vice President - Investor
Relations
(212)
922-1640
peg@dovercorp.com
Media Contact
Adrian Sakowicz
Vice President - Communications
(630) 743-5039
asakowicz@dovercorp.com
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Dover Corporation via Globenewswire
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