e425
Filed by Grey Wolf, Inc.
Commission File No. 1-08226
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Basic Energy Services, Inc.
Commission File No. 1-32693
Subject Company: Horsepower Holdings, Inc.
NEWS RELEASE
Grey Wolf, Inc. and Basic Energy Services, Inc. Agree to Combine in Merger of Equals Transaction
Merger Highlights:
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The merger creates a more diverse energy services company with expanded growth opportunities through enhanced scale,
broader geographic reach, balanced commodity exposure and expansion of service offerings |
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The new Grey Wolf will be led by a combination of both companies seasoned management teams |
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Tom Richards from Grey Wolf will be Chairman |
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Ken Huseman from Basic Energy Services will be Chief Executive Officer |
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David Crowley from Grey Wolf will be President and Chief Operating Officer |
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Alan Krenek from Basic Energy Services will be Executive Vice President and Chief Financial Officer |
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The 9-member Board of Directors will have representation approximately proportionate to ownership with 5 directors
nominated by Grey Wolf and 4 nominated by Basic Energy Services |
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The shareholders of both companies will receive a combination of shares in the new company and cash |
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HOUSTON, TEXAS, April 21, 2008 (BUSINESS WIRE) Grey Wolf, Inc. (Grey Wolf) (AMEX:GW) and Basic
Energy Services, Inc. (Basic Energy Services) (NYSE:BAS) today announced that their Boards of
Directors have approved a definitive agreement to combine the two businesses in a merger of
equals. Based upon closing prices for each companys common stock as of April 18, 2008, the
estimated enterprise value of the combined company would be approximately $2.9 billion. The
combined company will be named Grey Wolf, Inc., have its corporate offices in Houston, establish
incorporation in the state of Delaware and trade on the New York Stock Exchange under the symbol
GW.
Under the terms of the agreement, Grey Wolf shareholders will receive $1.82 in cash and 0.2500
shares of new Grey Wolf for each share of Grey Wolf they currently own. Based on this exchange
ratio, each stockholder of Grey Wolf will receive one share of new Grey Wolf for each four shares
of Grey Wolf in addition to the cash consideration. Basic Energy Services shareholders will
receive $6.70 in cash and 0.9195 shares of new Grey Wolf for each share of Basic Energy Services
they currently own. The total number of shares outstanding of the combined company, which is
reflective of the above exchange ratios applied to both companies respective current shares
outstanding, will be approximately 85 million shares. Pro forma net debt as of December 31, 2007
will be approximately $960 million. The combined company intends to dedicate a substantial amount
of its free cash flow to the repayment of the debt while at the same time fully funding and
implementing its significant, value-adding growth initiatives.
The greater financial strength of the combined company will enable it to return approximately $600
million in cash to the combined shareholder base while retaining financial flexibility to invest
for future growth. The financing will be provided by affiliates of UBS Investment Bank and Goldman,
Sachs & Co.. The cash is being issued to the two sets of shareholders proportionate to pro forma
ownership of the combined company, which will be approximately 54% owned by current Grey Wolf
shareholders and 46% owned by current Basic Energy Services shareholders.
The combination will create an organization with approximately 7,500 personnel, providing a broad
range of drilling and oilfield well services. The combined company will have 395 well servicing and
130 drilling rigs as well as a suite of other oilfield service assets, pro forma sales and EBITDA
of approximately $1,784 million and $632 million, respectively (for the full year ending 12/31/07).
Pro forma sales (for the full year ending 12/31/07) would be
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approximately 53% from contract drilling, 19% from well servicing, 15% from fluid services and 13%
from completion and remedial services.
Current Grey Wolf Chairman, President and CEO, Thomas P. Richards, who will serve as Grey Wolf,
Inc.s Chairman following the merger, said: This is an exciting opportunity for our shareholders,
our customers and our people. Grey Wolfs premium land drilling rig fleet complements Basic Energy
Services premium land-based well servicing equipment. With approximately 50% of Basic Energy
Services business focused on oil and approximately 95% of Grey Wolfs business focused on natural
gas, this transaction results in a company with a diversified revenue stream in terms of exposure
to oil and gas opportunities, involvement through the life of the well from drilling to production
to well abandonment and a very broad geographic coverage, all of which is consistent with our
stated strategic goal. We are confident that our valued customers will respond positively to this
merger with the combined companys enhanced ability to satisfy their needs. Grey Wolf has an
outstanding management team, as well as operational and support staff, which when combined with
Basic Energy Services organization, will produce a best-in-class team.
Ken Huseman, who will serve as Chief Executive Officer of Grey Wolf, Inc. after the merger, said,
This combination achieves the goal of moving Basic Energy Services forward in achieving a size
which allows the combined company to compete effectively for expansion opportunities anywhere in
the world while continuing to build upon the existing footprint of both companies. The expanded
operational capability of a more diversified company will produce significant benefits for our
customers and provide substantial growth opportunities for our people. In addition, the cash
consideration allows us to provide each companies shareholders with a meaningful financial return
without unduly limiting the growth potential for the combined entity. This is an ideal fit for the
stakeholders in both companies.
Following the merger, in addition to the executive officers listed above, Bob Proffit, current
Senior Vice President, Human Resources of Grey Wolf, will assume the role of Senior Vice President,
Administration at the combined company and Spencer Armour, current Senior Vice President, Corporate
Development of Basic Energy Services, will remain in the same role at the combined company.
Operating level officers for both companies will continue in their current roles.
Timing
The transaction is expected to close in the third quarter of 2008. Completion of the transaction is
subject to shareholder approval at both Grey Wolf and Basic Energy Services, receipt of financing
proceeds, regulatory approvals and other customary conditions. DLJ Merchant Banking Partners III,
L.P. and its affiliated funds, holders of approximately 44% of the outstanding shares of Basic
Energy Services, have entered into a voting agreement agreeing to vote in favor of the transaction.
Advisors
UBS Investment Bank is acting as exclusive financial advisor to Grey Wolf and Goldman, Sachs & Co.
is acting as exclusive financial advisor to Basic Energy Services. Simmons & Company International
provided a fairness opinion to the Board of Grey Wolf. Tudor, Pickering, Holt & Co. provided a
fairness opinion to the Board of Basic Energy Services. Porter & Hedges, L.L.P. and Gardere Wynne &
Sewell, LLP are acting as legal counsel to Grey Wolf, and Davis Polk & Wardwell and Andrews Kurth
LLP are acting as legal counsel to Basic Energy Services.
Conference Call
The senior management of Grey Wolf and Basic Energy Services will host a conference call on Monday,
April 21, 2008 at 11:00 a.m. Eastern Daylight Time. All individuals interested in participating in
the conference call should dial (800) 761-5415 domestically or (212) 231-2900 internationally 15
minutes prior to the starting time. The reservation number is 21381162. A replay of the call will
be available for 48 hours after the call. The telephone
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number for the replay of the call is (800) 633-8284 domestically or (402) 977-9140 internationally
and the access code is 21381162.
About Basic Energy Services
Founded in 1992, Basic Energy Services has grown to be the nations third largest well servicing
rig contractor with more than 4,600 employees in 11 states. From drilling to final abandonment,
Basic Energy Services provides a range of well site services to Americas oil and gas drilling and
producing companies that support the entire life cycle of a well. Headquartered in Midland, Texas,
Basic Energy Services operates in the major oil and gas producing markets in the US including South
Texas, the Texas Gulf Coast, the Ark-La-Tex region, North Texas, the Permian Basin of West Texas,
the Mid Continent, Louisiana Inland Waters and the Rocky Mountains. For more information about
Basic Energy Services, go to http://www.basicenergyservices.com
About Grey Wolf
Grey Wolf is the fourth largest provider of contract land drilling services in the United States.
It serves major and independent oil and gas companies with a premium fleet of 121 rigs. Located in
the nations most productive natural gas regions, it operates in South Texas, the Gulf Coast, the
Ark-La-Tex, Mississippi/Alabama, Mid Continent and Rocky Mountain areas on both a daywork and
turnkey basis. Grey Wolf also has two rigs deployed in Mexico. Approximately 95% of the wells
drilled by Grey Wolf are targeted to natural gas. For more information about Grey Wolf, go to
http://www.gwdrilling.com.
Forward Looking Statements and Additional Information
This document may include statements herein that are forward-looking statements as
defined by the Securities and Exchange Commission (the SEC). All statements, other than
statements of historical fact, included herein that address activities, events or developments that
Grey Wolf or Basic Energy Services expect, believe or anticipate will or may occur in the future
are forward-looking statements. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially, including required approvals by
stockholders and regulatory agencies, the possibility that the anticipated benefits from the
proposed mergers cannot be fully realized, the possibility that costs or difficulties related to
integration of the two companies will be greater than expected, the impact of competition and other
risk factors included in the reports filed with the SEC by Grey Wolf and Basic Energy Services.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of their dates. Except as required by law, neither Grey Wolf nor Basic Energy Services
intends to update or revise its forward-looking statements, whether as a result of new information,
future events or otherwise.
Additional Information and Where to Find It
In connection with the proposed mergers, a registration statement of Horsepower
Holdings, Inc. (Holdings), which will include proxy statements of Basic Energy Services and Grey
Wolf and other materials, will be filed with the Securities and Exchange Commission. INVESTORS AND
SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT/PROSPECTUS AND THESE OTHER MATERIALS REGARDING THE PROPOSED TRANSACTION WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT BASIC ENERGY SERVICES, GREY WOLF,
HOLDINGS AND THE PROPOSED TRANSACTION. Investors and security holders may obtain a free copy of the
registration statement and the proxy statement/prospectus when they are available and other
documents containing information about Basic Energy Services and Grey Wolf, without charge, at the
SECs web site at www.sec.gov, Basic Energy Services web site at www.basicenergyservices.com, and
Grey Wolfs web site at www.gwdrilling.com. Copies of the registration statement and the proxy
statement/prospectus and the SEC filings that will be incorporated by reference therein may
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also be obtained for free by directing a request to either Investor Relations, Basic Energy
Services, Inc., (432) 620-5510 or to Investor Relations, Grey Wolf, Inc., (713) 435-6100.
Participants in the Solicitation
Basic Energy Services and Grey Wolf and their respective directors, officers and
certain other members of management may be deemed to be participants in the solicitation of proxies
from their respective stockholders in respect of the mergers. Information about these persons can
be found in Grey Wolfs proxy statement relating to its 2008 annual meetings of stockholders as
filed with the SEC on April 8, 2008. Information concerning beneficial ownership of Basic Energy
Services stock by its directors and certain of its executive officers is included in its proxy
statement dated April 5, 2007 and subsequent statements of changes in beneficial ownership on file
with the SEC. Additional information about the interests of such persons in the solicitation of
proxies in respect of the merger will be included in the registration statement and the joint proxy
statement/prospectus to be filed with the SEC in connection with the proposed transaction.
CONTACT:
Grey Wolf, Inc.
David Wehlmann, Chief Financial Officer
713-435-6100
Basic Energy Services, Inc.
Alan Krenek, Chief Financial Officer
432-620-5500
DRG&E / 713-529-6600
Jack Lascar/Sheila Stuewe
SOURCES: GREY WOLF AND BASIC ENERGY SERVICES
GREY WOLF, INC.
10370 Richmond Avenue Suite 600 Houston, Texas 77042-4136
(713) 435-6100 Fax (713) 435-6170
www.gwdrilling.com
BASIC ENERGY SERVICES, INC.
500 W. Illinois Suite 100 Midland, TX 79701
(432) 620-5500 Fax (432) 620-5501
www.basicenergyservices.com
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