HOUSTON, Jan. 11, 2019 /PRNewswire/ -- Flotek
Industries, Inc. (NYSE: FTK) ("Flotek") today announced it has
entered into a definitive agreement to sell Florida Chemical
Company, LLC ("FCC" or "Florida Chemical"), its Consumer and
Industrial Chemistry Technologies segment, to Archer Daniels
Midland Company (NYSE: ADM) ("ADM") for total consideration of
$175 million in cash, subject to
post-closing working capital and other adjustments. With this
transaction, Flotek has established itself as a leading specialty
chemistry provider of custom, full-fluid solutions to the upstream
oil and gas industry. Flotek will retain all of its
patents.
In connection with the sale of FCC, Flotek and ADM have entered
into long-term reciprocal supply agreements. The first will secure
Flotek's long-term supply of d-limonene. Additionally, Flotek will
manufacture differentiated chemistries for Florida Chemical's
industrial customers. Finally, the companies will explore
opportunities to jointly develop next-generation chemistry
technologies for the oil and gas and agricultural industries.
The closing of the transaction is expected during the first
quarter of 2019 and is subject to customary closing conditions,
including obtaining necessary approval related to the
Hart-Scott-Rodino Act. Flotek anticipates that the transaction will
have a negligible cash tax effect, as the gain on this sale should
be substantially offset by the Company's outstanding net operating
losses.
John Chisholm, Flotek's Chairman,
President and Chief Executive Officer, commented, "We believe the
benefits of this transaction are extremely compelling on multiple
fronts and in the best interest of our stakeholders. This
transaction unlocks significant value for our stakeholders, while
maintaining our access to key raw materials for our Energy
Chemistry Technologies ("ECT") business. The transaction also
enhances our flexibility to evaluate and pursue the long-term
strategy for our core ECT business. Additionally, we are very
excited about our long-term relationship with ADM to develop unique
opportunities to more fully leverage their vast, high-performing
portfolio of products to better serve the oil and gas market for
many years to come. This transaction has created a synergistic
relationship that brings strategic benefits to each company and our
stakeholders."
Vince Macciocchi, President of
ADM's Nutrition business unit, commented, "ADM is already a leader
in natural flavors for food and beverages, offering a wide variety
of high-value products and solutions in areas such as vanilla and
mint, and this acquisition will place us in a leadership position
for citrus flavors as well. Citrus is one of the
fastest-growing flavor categories, and the single most important
taste profile for beverages, and no one in North America does citrus better than Florida
Chemical Company."
In 2013, Flotek acquired Florida Chemical to vertically
integrate its supply of citrus oils, a key raw material in its
patented Complex nano-Fluid® ("CnF®") suite
of technologies. Since the original acquisition, the Company's
Energy Chemistry Technologies segment has benefitted from FCC,
which enabled Flotek to better manage feedstock costs through the
energy downturn from 2014 to 2016, pursue a new go-to-market
strategy, and mitigate raw material price inflation caused by
citrus greening disease and a significantly limited supply of
global citrus oils. Simultaneously, Florida Chemical has expanded
its client base and product offerings, while enhancing its
processing and distillation capabilities and leveraging its
world-class supply chain and highly respected employee base to
penetrate into food and beverage applications. This divestiture is
the natural next step in Flotek's evolution, capturing the value of
FCC while securing the supply of feedstock required to create the
Company's patented chemistries.
"ADM is a world-class leader in transforming crops into
agricultural and food products. Recognized for its industry-leading
capabilities and assets, Florida Chemical will be a significant
strategic addition to ADM as they further expand their
industry-leading flavor and fragrance offerings. We thank the
Florida Chemical team for their invaluable contributions and look
forward to continuing our strong relationship moving forward," said
Chisholm.
ECT Outlook and Related Initiatives
Following closing
of the transaction, Flotek will focus its efforts on providing its
global clients best-in-class solutions designed to maximize
performance of their oil and gas wells, while simultaneously
lowering well costs and fluid complexity. Flotek intends to use the
net proceeds to pay off its credit facility balance of
approximately $50 million. In
addition, the Company is currently considering investing
$20 million to $30 million in previously identified organic
growth capital projects and will carefully review other future
potential uses of the remaining funds.
Flotek intends to establish a Strategic Capital Committee (the
"Committee") to evaluate and make recommendations to the Board
regarding the manner in which the Company will deploy the remaining
net proceeds from the sale of FCC. This includes the potential for
additional investments in its business, returning capital to
shareholders and other potential alternatives. The Committee plans
to engage a leading advisory firm.
Chisholm concluded, "I look forward to a thorough review by our
Strategic Capital Committee concerning the best use of the
remaining net proceeds from the transaction and updating
shareholders as to the results of that process. In addition, we
look forward to continuing to benefit from Florida Chemical's
citrus products through our long-term supply agreement with ADM.
Finally, we are excited to partner with ADM as we seek new
opportunities to expand our offerings to the oil and gas
industry."
Advisors
Evercore is acting as exclusive financial
advisor to Flotek in connection with the transaction.
Conference Call
Flotek will host a conference call on
January 14, 2019, at 9:00 a.m. CT/10:00 a.m.
ET to discuss the transaction and its go-forward priorities
for its Energy Chemistry Technology business. To participate in the
call, participants should access the webcast on
www.flotekind.com under the Investor Relations section or dial
877-870-4263 approximately five minutes prior to the start of the
call. A recording of the call will also be available on the website
shortly after the call is concluded.
About Florida Chemical Company, LLC
Founded in 1942,
Florida Chemical designs and delivers high-quality products that
meet the demands of a variety of consumer and industrial
applications, including food and beverage, fragrance, and household
and industrial cleaning products. Sourcing citrus oil domestically
and internationally, it is one of the largest processors in the
world.
About Flotek Industries, Inc.
Flotek develops and
delivers prescriptive, reservoir-centric chemistry technologies to
oil and gas clients designed to address every challenge in the
lifecycle of the reservoir and maximize recovery in both new and
mature fields. Flotek's inspired chemists draw from the power of
bio-derived solvents to deliver solutions that enhance energy
production. Flotek serves major and independent energy producers
and oilfield service companies, both domestic and international.
Flotek Industries, Inc. is a publicly traded company headquartered
in Houston, Texas, and its common
shares are traded on the New York Stock Exchange under the ticker
symbol "FTK." For additional information, please visit Flotek's web
site at www.flotekind.com.
About ADM
For more than a century, the people of
Archer Daniels Midland Company (NYSE: ADM) have transformed crops
into products that serve the vital needs of a growing world. Today,
we're one of the world's largest agricultural processors and food
ingredient providers, with approximately 31,000 employees serving
customers in more than 170 countries. With a global value chain
that includes approximately 500 crop procurement locations, 270
food and feed ingredient manufacturing facilities, 44 innovation
centers and the world's premier crop transportation network, we
connect the harvest to the home, making products for food, animal
feed, industrial and energy uses.
Forward-Looking Statements
Certain statements set
forth in this Press Release constitute forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934) regarding
Flotek Industries, Inc.'s business, financial condition, results of
operations and prospects. Words such as expects, anticipates,
intends, plans, believes, seeks, estimates, will, should and
similar expressions or variations of such words are intended to
identify forward-looking statements, but are not the exclusive
means of identifying forward-looking statements in this Press
Release.
Although forward-looking statements in this Press Release
reflect the good faith judgment of management, such statements can
only be based on facts and factors currently known to management.
Consequently, forward-looking statements are inherently subject to
risks and uncertainties, and actual results and outcomes may differ
materially from the results and outcomes discussed in the
forward-looking statements. Factors that could cause or contribute
to such differences in results and outcomes include, but are not
limited to, demand for oil and natural gas drilling services in the
areas and markets in which the Company operates, competition,
obsolescence of products and services, the Company's ability to
obtain financing to support its operations, environmental and other
casualty risks, and the impact of government regulation.
Further information about the risks and uncertainties that may
impact the Company are set forth in the Company's most recent
filings on Form 10-K (including without limitation in the "Risk
Factors" Section), and in the Company's other SEC filings and
publicly available documents. Readers are urged not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this Press Release. The Company undertakes no
obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the
date of this Press Release.
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SOURCE Flotek Industries, Inc.