Sale big for JACAM and Sterling [The Hutchinson News, Kan.]
(Hutchinson News, The (KS) Via Acquire Media NewsEdge) March 02--Breakout:
Details of the terms of the JACAM acquisition are set out in an "Asset Purchase Agreement" that will be filed by Canadian Energy Services & Technology Corp on SEDAR, the Canadian Securities system for electronic document retrieval, found at www.sedar.com.
The purchase of JACAM Chemicals in Sterling by a publicly traded Canadian corporation will mean tremendous immediate growth for the Kansas company, as well as opportunities for even more expansion in the future, said the company's founder.
Calgary-based Canadian Energy Services & Technology Corp. (CESTC) announced the acquisition of JACAM in a $240 million deal late Friday.
"We weren't out pursuing it," said JACAM CEO Gene Zaid. "They came to us."
"We knew people in common," explained JACAM President Jason West. "People in the industry told them we were an up and coming business, with solid manufacturing, solid distribution, and a clean plant, and that they should come talk to us."
The purchase, which includes $170 million in cash and the issuance of $60 million in common shares of CESTC stock to JACAM, has been in the works for about eight months, the two men said.
There were a lot of reasons that made sense for the merger, Zaid said, with the primary one being the opportunity to expand JACAM's production and customer base.
"They provide drilling mud to drilling rigs," Zaid said. "The mud requires emulsifiers, polymers, anti-scaling, corrosion inhibitors -- all the products manufactured by JACAM. We can provide them almost immediately."
"Our geographical maps didn't line up, in terms of where we were strong and they didn't have a presence, and vice versa," West said.
CESTC, about four times the size of JACAM in terms of annual sales, also is involved in producing products for the multiple phases of oil production, "at the drill-bit; for completions and stimulations; at the wellhead or pump-jack; and through to the pipeline and mid-stream market," according to CESTC President and CEO Tom Simons.
Growth upon growth
With the purchase, CESTC now has access to JACAM's products, its underutilized chemical manufacturing capability, as well as its client base.
The Sterling plant, which moved to its current location north of town in 2008 after a fire, has expanded several times in recent years, including development of a new hydrogenation process wing that's nearing completion. The plants' current configuration, according to Simons' release, is estimated to be operating at only about "20 percent of its through-put capacity, leaving room for significant production volume increases if sales warrant."
JACAM currently manufactures and distributes more than 400 proprietary products, including eight trademarked solutions, and it has 29 U.S. registered patents.
"JACAM has custom developed these products and solutions by listening to their customer's challenges and then designing solutions in their state-of-the-art research and development laboratory," Simons noted in the acquisition announcement release. "CESTC expects to bring many of these products to the Canadian market and expand JACAM's reach into other parts of the U.S. market.
"We have acquired the technical capability, the manufacturing capability and the sales platform from which we can grow and expand our U.S. production and specialty chemical business. The JACAM Acquisition also compliments our PureChem business unit in Canada and will augment its already substantial product line and capabilities."
Zaid started his company 31 years ago in a garage laboratory, delivering barrels of his product directly to oilfields in the back of an old pickup. Today the company employs 350 people in 10 states.
While he didn't have estimates on what the change ultimately might mean in Sterling, Zaid estimated JACAM would add another 50 employees before the end of the year, in all phases of its operation, from the field to its manufacturing plant to its headquarters. Most will be in Sterling.
"We were in Hutchinson Saturday hiring another pilot," he said, since the company has also already added to its small stable of jets, which are based at Wells Aircraft in Hutchinson.
The company has also recently prepared ground for a new 1,600 square foot, two story office building next to its current headquarters in downtown Sterling.
"Tom (Simons) suggested we considering making it three stories," Zaid said.
Retain its image
JACAM will become a subsidiary of the much younger CESTC, retaining its name, logo and brands, as well as its management. Zaid will remain chief executive officer of the JACAM business unit and West as president. The agreement grants Zaid "observer status" at CESTC board meetings and West will join the CESTC board as a non-independent director.
"JACAM is now one of the largest stockholders in Canadian Energy Services," Zaid said. "We'll become the epicenter of the company's U.S. operations. The area will be very busy, in terms of customers coming in and investors. They'll be a lot of traffic at every level, from scientists to business people to oil operators."
Employees were informed of the sale during a meeting on Friday.
"We used the community center to make the announcement," Zaid said. "We had about 150 people at the meeting."
"We will work hard to lead our people, our company through this transition," Zaid said. "I hope they will see the future through my eyes, and to have the vision I have for continued growth of the company.
All current employees, as well as JACAM's original stockholders, will share in the profit from the sale, Zaid said. Plans are to give every employee a distribution worth 15 percent of their base salary, more to some employees, he said.
Stockholders who originally invested just $5 to $15 per share in the company are all now millionaires, Zaid said.
"It's a great opportunity for the community as well," he said.
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