Exit: JDH Capital selling Elite Compression to Archrock for $410m


[Context: On June 24, JDH Capital-backed Elite Compression announced an agrement to be acquired for $410m (50/50 cash and stock) by Archrock, Inc. (NYSE: AROC). Further details, advisors and related links are below.]


>>Acquiring approximately 430,000 of compression horsepower from Elite Compression Services for approximately $410 million in cash and Archrock common stock
>>Reinforces focus on large horsepower compression serving midstream infrastructure with blue-chip customers
>>Accretive to earnings and free cash flow per share and supports our path to achieving sub-4.0x leverage in 2020
>>Enhances basin density across key U.S. growth areas
>>Archrock’s concurrent sale of approximately 80,000 horsepower of non-core compression assets for $30 million further standardizes compression fleet
>>Addition of Jeffery D. Hildebrand to Archrock’s Board of Directors will add substantial industry expertise

HOUSTON, June 24, 2019 (GLOBE NEWSWIRE) — Archrock, Inc. (NYSE: AROC) (“Archrock”) today announced that it has entered into a definitive agreement to acquire substantially all assets of Elite Compression Services, LLC (“Elite”), a portfolio company of JDH Capital Company, including approximately 430,000 of predominately large-horsepower compression assets for total consideration of $410 million. The transaction will be funded with approximately $205 million of cash and approximately 21.7 million newly issued Archrock common shares to the seller. In conjunction with the transaction, Harvest Midstream Company (“Harvest Midstream”) will acquire approximately 80,000 active and idle compression horsepower from Archrock for $30 million in cash. Archrock’s Board of Directors has appointed energy industry veteran Jeffery D. Hildebrand, Executive Chairman and Founder, of Hilcorp Energy Company, which is affiliated with JDH Capital and Harvest Midstream, to Archrock’s Board of Directors upon closing of the transactions.

“We are excited to announce the acquisition of Elite’s excellent contract compression operations in a transaction that will immediately benefit Archrock shareholders through accretive earnings and cash flow growth,” said Brad Childers, President and Chief Executive Officer of Archrock. “The assets being acquired from Elite are highly utilized, predominantly large-horsepower compression units, more than 80% of which are contracted for more than three years with blue-chip customers. We expect the acquired assets to generate approximately $55 million of annualized adjusted EBITDA, inclusive of $5 million in annualized cost synergies. In addition, this transaction adds basin density in our core areas, with more than 70% of the units deployed in the Eagle Ford and South Texas region, and the concurrent sale of non-core equipment further standardizes our asset portfolio. We believe these transactions support our ability to achieve our stated financial targets, including reducing our leverage to below 4.0x in 2020, growing our dividend between 10% and 15% annually through 2020, and maintaining dividend coverage of more than 2.0x through 2020.”

“Archrock and Elite have been fantastic service providers of ours for many years, and we are pleased to be partnering with a company that is aligned with our strategy of natural gas production growth and best in class midstream operations. They have sufficient scale, experience and capabilities to grow with us over time,” said Jeff Hildebrand. “Further, I am very proud of the extraordinary effort and leadership Jerry Blackmon and the management team at Elite have exhibited since the company was formed. I am also excited to serve on the Archrock board, and look forward to working with the company to further advance Archrock’s strategy as both a board member and substantial owner.”

Additional Transaction Financing and Closing Details

The acquisition will be financed with 21,656,683 Archrock shares to be issued to JDH Capital (equivalent to $205 million of common stock based on the volume weighted average stock price over the 10 trading days ended June 21, 2019) and $175 million in cash, on a net basis. The acquisition and pending sale transactions are subject to customary closing conditions, including receipt of regulatory approvals, and are expected to close during the third quarter of 2019.


Citi is acting as exclusive financial advisor and Latham & Watkins is acting as legal advisor to Archrock. Intrepid Partners, LLC is acting as exclusive financial advisor and Kirkland & Ellis is acting as legal advisor to JDH Capital and Elite.

About Archrock

Archrock is an energy infrastructure company with a pure-play focus on midstream natural gas compression. Archrock is the leading provider of natural gas compression services to customers in the oil and natural gas industry throughout the U.S. and a leading supplier of aftermarket services to customers that own compression equipment in the U.S. Archrock is headquartered in Houston, Texas, with approximately 1,700 employees.

About JDH Capital

JDH Capital is a private investment firm based in Houston, Texas established to manage the assets of Jeffery D. Hildebrand and his family. JDH Capital engages in a wide range of investment activities and has invested in a number of growing businesses.

About Harvest Midstream Company

Harvest Midstream Company is a privately held midstream services provider based in Houston, Texas, that operates crude oil and natural gas gathering, storage, transportation, treatment and terminalling assets across the Lower 48 and Alaska. To learn more visit www.harvestmidstream.com

Related Links

Liked it? Take a second to support Mark Druskoff on Patreon!