T-3 Energy Services (Nasdaq: TTES), like most oil patch services firms, has had a wild ride over the years. From a sub-$5 share price in 2003, to over $80 in 2008, to back under $10 in ... 2008, it's been enough to give shareholders some serious whiplash. Depending on your entry price, today's buyout offer from Robbins & Myers (NYSE: RBN) is either bittersweet or just plain sweet.
Robbins, a more diversified industrial concern, has offered T-3 shareholders 0.894 shares, plus $7.95 in cash, for each share of T-3. At current prices, that's a total consideration of around $30.56, roughly a quarter of which is in cash.
Robbins' interest in T-3 is pretty obvious. The company will better be able to compete with the likes of Colfax (NYSE: CFX) -- a strong but relatively unknown company modeled on cash flow king Danaher (NYSE: DHR) -- and the formidable Flowserve (NYSE: FLS).
T-3's motivation in selling today is less clear. This company has been a serial acquirer over the years, picking up at least nine businesses. Why flip the script now?
My first thought was that private equity giant First Reserve, which helped form the company back in 2000, might be seeking an exit. But First Reserve did so years ago through a series of public follow-on offerings. Perhaps management is looking to cash out instead?
One indicator is the language in the press release, noting that "the combined company will be led by Robbins & Myers' existing management and board of directors." Another interesting fact is that T-3's Chairman and CEO has only held the position since March 2009. Perhaps this National Oilwell Varco (NYSE: NOV) vet has been positioning the company for a sale ever since.
Idle speculation aside, the important question here is this: Are T-3 shareholders getting a fair shake? On an enterprise value-to-EBITDA basis, the deal looks pretty fair at a multiple of more than 15. Another interesting data point is that First Reserve offered its last batch of shares to the public in April 2007 at $22.74. Sure, oil prices are higher today, but given what's happened to the economy in the intervening period, I have to say this looks like a pretty decent deal for shareholders.
