UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 3)
SUPERIOR WELL SERVICES, INC.
(Name of Subject Company)
SUPERIOR WELL SERVICES, INC.
(Name of Person Filing Statement)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
86837X105
(CUSIP Number of Class of Securities)
David E. Wallace
Chief Executive Officer
1380 Rt. 286 East, Suite #121
Indiana, Pennsylvania 15701
(724) 465-8904
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of the persons filing statement)
With copies to:
Brett E. Braden
Michael E. Dillard
Latham & Watkins LLP
717 Texas Avenue, Suite 1600
Houston, Texas 77002
(713) 546-5400
o
Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender
offer.
TABLE OF CONTENTS
This Amendment No. 3 amends and supplements the Solicitation/Recommendation Statement on
Schedule 14D-9 of Superior Well Services, Inc. (the
Company
) filed with the Securities
and Exchange Commission (the
SEC
) on
August 12, 2010 (together with Amendment No. 1 thereto filed
with the SEC on August 24, 2010 and Amendment No. 2 thereto filed
with the SEC on August 27, 2010, the
Schedule 14D-9
). The Schedule 14D-9 relates to the tender
offer by Diamond Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Nabors
Industries Ltd., a Bermuda exempt company, disclosed in the Tender Offer Statement on Schedule TO
filed with the SEC on August 12, 2010, as amended by Amendment No. 1 thereto filed with the SEC on
August 24, 2010 and Amendment No. 2 thereto filed with the SEC on August 30, 2010, to purchase all
of the outstanding shares of common stock of the Company, par value $0.01 per share (the
Shares
), at a purchase price of $22.12 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the offer to purchase, dated
August 11, 2010 (as amended or supplemented from time to time, the
Offer to Purchase
),
and in the related letter of transmittal (as amended or supplemented from time to time, the
Letter of Transmittal
). Copies of the Offer to Purchase and the Letter of Transmittal
were filed with the Schedule 14D-9 as
Exhibits (a)(1)(A)
and
(a)(1)(B)
,
respectively.
Capitalized terms used and not defined herein shall have the meanings assigned to such terms
in the Schedule 14D-9.
Item 3.
Past Contacts, Transactions, Negotiations and Agreements.
Footnote (1)(a) to the table Potential Payouts Upon
Termination following the Completion of the Offer on page 7 is hereby amended and restated as follows:
Severance in an
amount equal to (i) for Messrs. Wallace, Linaberger and Reese, two times his annual base
salary determined as of the date of the change of control plus his annual bonus, to be paid in a
lump sum on or before the fifth day following the last day of the executives employment, (ii) for
Messrs. Stoelk, Arnold and Seyman, one
times his annual base salary determined as of the date of change of control to be paid in a
lump sum on or before the fifth day following the last day of Messrs. Stoelks, Arnolds and Seymans employment.
The second sentence of footnote (1)(b) to the
table Potential Payouts Upon Termination following the
Completion of the Offer on page 7 is hereby amended and restated as follows:
For Messrs. Arnold, Stoelk and Seyman, the amounts in
the table reflect the amounts that the Company would be required to reimburse the executives
for the difference between the costs of continued coverage and the employee
contribution amount required of the Companys active senior executives for similar coverage.
Item 4.
The Solicitation or Recommendation.
The following sentence is hereby inserted after the sixth sentence of the second paragraph
under the heading Background of the Offer on page 11:
Parent was not one of the 12 potential candidates for a strategic acquisition of the Company
identified by the Board of Directors.
The following is hereby inserted at the end of the fourth full paragraph on page 13:
As of such date, each of the companies that had earlier communicated interest to the Company
in pursuing a potential business combination had either withdrawn such interest or had acquired the
business or pressure pumping assets of other companies. The Company had not received any
indications of interest in a potential business combination from any potential candidate since
September 2009 and, other than Parent, none of the other companies interested in acquiring the
Companys fluid logistics business had indicated any interest in acquiring the Company as a whole.
Therefore, the Company believed it was unlikely to receive an offer from any other party to acquire
the Company at a price higher than that offered by Parent.
The last sentence of the seventh full paragraph on page 13 is hereby amended and restated as
follows:
The Board of Directors then reviewed a presentation by Simmons that included a summary of the
relative trading performance of the Shares compared to the OSX (as defined below) and comparable
companies in the industry, the recent trading multiples of comparable companies in the industry,
and the implied premium to the Companys stockholders represented by Parents offer at various
trading intervals based on the Companys historical trading price. Simmons advised the Board of
Directors with respect to valuation, but did not provide a definitive valuation of the Company.
The Board of Directors, after consulting with Simmons, rejected Parents offer as insufficient
primarily based on the most recent closing price of the Shares, which was $16.90, and the implied
premium to the Companys stockholders represented by Parents offer, as well as Parents intention
that the transaction be structured as a fixed-value transaction with a floating number of shares of
Parent issued to the Companys stockholders. The Board of Directors authorized Simmons to deliver
another counterproposal to Parent that structured the transaction as an all-stock deal with a
fixed-exchange ratio valuing the Company at $21.50 per Share, with a collar of 15% on any increase
or decrease in the consideration.
The second sentence of the fifth full paragraph on page 14 is hereby amended and restated as
follows:
Simmons advised the Board of Directors with respect to valuation, but did not provide a
definitive valuation of the Company. After considering Mr. Wallaces report and consulting with
Simmons, and in light of the last closing price of the Shares (on July 23, 2010), which was $19.44,
as well as the materials Simmons had presented to the Board of Directors at prior meetings with
respect to the Companys historical trading performance, its relative trading performance compared
to the OSX and comparable companies in the industry, and the implied premium represented to the
Companys stockholders by Parents offer at various trading intervals based on the Companys
historical trading price, the Board of Directors determined that a 20% premium over the last
closing price of the Shares was a justifiable request to make to Parent.
The bullet with the heading Review of Strategic Alternatives on page 17 is hereby amended and
restated as follows:
|
|
|
Review of Strategic Alternatives.
The Board of Directors belief
that the value offered to stockholders in the Offer and the Merger was
more favorable to the stockholders of the Company than the possible
value represented by other strategic alternatives reasonably available
to the Company, including proceeding with the sale of the Companys
fluid logistics business instead of engaging in a business combination
with Parent, issuing additional equity in the Company, remaining an
independent Company and pursuing the Companys strategic plan, and
pursuing a business combination with another party. The Board of
Directors reached this conclusion after (a) conducting a thorough,
independent review over approximately the past year of such other
strategic alternatives, in each case taking into account the potential
benefits, risks and uncertainties associated with such other strategic
alternatives, including the risk that another party to a potential
business combination would not be identified, and (b) discussions with
the Companys management and advisors over approximately the past year
with respect to such other strategic alternatives.
|
The second paragraph under the heading Opinion of SimmonsSelected Companies Analysis on page 22 is hereby amended
and restated as follows:
Simmons selected these companies on the basis of their comparable business characteristics to
the Company. Although none of the selected companies is directly comparable to the Company, the
selected companies are publicly traded companies with business and market characteristics that, for
purposes of analysis, may be considered similar to certain business and market characteristics of
the Company. Each of the selected companies has one or more of the following in common with the
Company: industry demand drivers, customers, service lines, locations, and enterprise value
range.
The third paragraph under the heading Opinion of SimmonsSelected Companies Analysis on page 22 is hereby amended
and restated as follows:
Simmons calculated and compared various financial multiples and ratios of the selected
companies based on SEC/Canadian Securities Administrators filings by the respective companies and
the mean of estimates of securities research analysts obtained from Bloomberg. The multiples and
ratios of the Company were based on information from SEC filings, Bloomberg data and information
provided by the Companys management. The multiples and ratios of the Company and of the selected
companies were calculated using closing prices on August 5, 2010. Simmons calculated the
enterprise value of each company as the sum of the market value of its common equity, the book
values of its preferred stock (where applicable), minority interests held by other companies and
debt, minus investments in unconsolidated affiliates and cash. Simmons calculated the adjusted
book value of each company as the sum of the book value of its shareholders equity, the book
values of its preferred stock, minority interests held by other companies and debt, minus
investments in unconsolidated affiliates and cash. Simmons calculated enterprise value to EBITDA
multiples by dividing the enterprise value number by the appropriate EBITDA number. Simmons
used publicly available company SEC/Canadian Securities Administrators filings for historical
EBITDA data. For projected EBITDA numbers, Simmons used the mean of estimates of securities
research analysts obtained by Bloomberg. Bloomberg data is available to the public at a
subscription cost. For the Company, Simmons also used projected data provided by Company
management, which is set forth above under the heading Projected Financial Information Regarding
the Company. The results of these analyses are summarized as follows:
The first paragraph under the heading Opinion of SimmonsSelected Transactions Analysis on page
22 is hereby amended and restated as follows:
Selected Transactions Analysis.
Simmons analyzed certain information relating to 14 selected
pressure pumping transactions since December 2005. The selected pressure pumping transactions were
those for which Simmons had information regarding transaction value and fleet horsepower, and are
set forth in the table below. Any transactions where such data was not available or a large,
non-quantifiable portion of the target was not pressure pumping related were excluded.
|
|
|
|
|
|
|
|
|
|
Date Announced
|
|
Acquiror
|
|
Target
|
2010*
|
|
Patterson-UTI Energy
|
|
Key Energy Services Pressure Pumping Assets
|
2010
|
|
Trican Well Service
|
|
Vanguard Energy Group
|
2009
|
|
Calfrac Well Services
|
|
Century Oilfield Services
|
2009
|
|
Calfrac Well Services
|
|
Pure Energy Services
|
2008
|
|
Superior Well Services
|
|
Assets of Diamondback
|
2008
|
|
Waveland Capital Group
|
|
Vanguard Energy Group
|
2008
|
|
Complete Production Services
|
|
Frac Source
|
2007
|
|
Calfrac Well Services
|
|
Bonnetts Energy Service Trust
|
2007
|
|
Trican Well Service
|
|
Liberty Pressure Pumping
|
2007
|
|
Basic Energy Services
|
|
JetStar Energy Services
|
2006
|
|
Chesapeake Energy Corp.
|
|
Frac Tech Services (19.9% Stake)
|
2006
|
|
Complete Production Services
|
|
PumpCo Services
|
2006
|
|
Diamondback Holdings
|
|
11 Entities (including Sooner-Total)
|
2005
|
|
Quintana Energy Partners
|
|
Consolidated Oil Well Services
|
|
|
|
*
|
|
Transaction announced but not yet closed
|
Simmons excluded from the transaction value of certain transactions the estimated
purchase price of working capital, goodwill, intangibles and estimated amounts allocated to
non-fracturing assets. The following table summarizes this analysis:
The first paragraph on page 23 is hereby amended and restated as follows:
Simmons also analyzed certain information relating to 20 selected energy service transactions
since 2006. This second sample of transactions was considered to evaluate the contemplated
transaction in comparison to selected energy service transactions on a transaction value-to-EBITDA
ratio basis (as opposed to transaction value per unit horsepower analyzed in the first set of
selected transactions). Transactions were selected based on the acquired companys services being
somewhat related to those of the Company and on the availability of financial
information to calculate multiples. Several of the transactions in the first sample set
are also included in the second sample set when such data was available to Simmons. For each of
the selected transactions and for the transaction contemplated by the Merger Agreement, Simmons
calculated and compared the ratio of the transaction value to the trailing twelve month EBITDA and
Projected EBITDA. EBITDA multiples for the selected transactions were derived primarily from
public sources (company filings, press releases, Bloomberg and IHS Herold). Bloomberg and IHS
Herold data are both available to the public at a subscription cost. Simmons does have certain
material, non-public and proprietary information regarding transactions that it receives in the
course of conducting its business. Simmons uses this information in its analyses, but refrains
from releasing specific, identifying transaction details. The following tables summarize this
analysis (transactions where Simmons has confidential information are disguised):
|
|
|
|
|
Date Announced
|
|
Acquiror
|
|
Target
|
2010*
|
|
Acquiror A
|
|
Target A
|
2010*
|
|
Acquiror B
|
|
Target B
|
2010*
|
|
Wellspring Capital Management
|
|
OMNI Energy Services
|
2010*
|
|
Halliburton Energy Services
|
|
Boots & Coots
|
2009
|
|
Acquiror C
|
|
Target C
|
2008
|
|
Superior Well Services
|
|
Assets of Diamondback
|
2008
|
|
Acquiror D
|
|
Target D
|
2008
|
|
Acquiror E
|
|
Target E
|
2007
|
|
GE Energy
|
|
Sondex
|
2007
|
|
Acquiror F
|
|
Target F
|
2007
|
|
Acquiror G
|
|
Target G
|
2007
|
|
Acquiror H
|
|
Target H
|
2007
|
|
Acquiror I
|
|
Target I
|
2007
|
|
Acquiror J
|
|
Target J
|
2007
|
|
Halliburton Energy Services
|
|
Ultraline Services
|
2006
|
|
Acquiror K
|
|
Target K
|
2006
|
|
National Oilwell Varco
|
|
NQL Energy Services
|
2006
|
|
Complete Production Services
|
|
PumpCo Services
|
2006
|
|
Grant Prideco
|
|
Anderson Group
|
2006
|
|
Acquiror L
|
|
Target L
|
|
|
|
*
|
|
Transactions announced but not yet closed
|
The section under the heading Opinion of SimmonsDiscounted Cash Flow Analysis on page 23
is hereby amended and restated as follows:
Discounted Cash Flow Analysis.
Simmons performed a discounted cash flow analysis on the
Company for the projected six months ended December 31, 2010, and fiscal years 2011 through 2014.
Simmons considered three separate projection cases in which the Companys EBITDA margins increased
and decreased under different scenarios to capture different potential future operating results: a
base case, a high case and a low case. Each case utilized managements projection for the
projected six months ended December 31, 2010. The base case analysis reflects the following: (a)
management projections for 2011, (b) after 2011, revenue is projected to grow by 10.0%, 7.5% and
5.0% for fiscal years 2012, 2013 and 2014, respectively, (c) expansion in EBITDA margins in 2011,
with the EBITDA margins remaining similar in 2012 before declining in 2013 and 2014 to the
Companys approximate long-term historical average and (d) capital expenditures remain constant at
2012 levels. The high case analysis reflects the following: (a) revenue growth of 38.5% in
2011, (b) after 2011, revenue is projected to grow by 15.7%, 15.0% and 10.0% for fiscal years 2012,
2013 and 2014, respectively, (c) EBITDA margins held constant at 2011 levels through 2014 and (d)
capital expenditures in 2011 and 2012 required to build three additional fracturing spreads in each
year and normalized maintenance capital expenditures levels thereafter. The low case analysis
reflects the following: (a) 2011 revenue and EBITDA margins consistent with full-year 2010 results,
(b) after 2011, revenue is projected to decline by 20% in 2012 and increase by 5% in each of 2013
and 2014, (c) EBITDA margins in 2012 decline to
approximate Q1 2010 levels, partially recovering in 2013 and 2014 and (d) capital expenditures
held at minimum maintenance levels.
The historical average used by Simmons in the base case scenario is based on the Companys
reported Adjusted EBITDA from 2002 through the first six months of 2010, using pro forma EBITDA in
2008 reflecting a full year of Diamondback results and excluding the effect of one-time write-offs
in 2009, which yield an average EBITDA margin of 20.3%. Simmons used 20.5% for the last year of
the base case scenario.
Simmons calculated illustrative implied present values of unlevered free cash flows, defined
as EBITDA less cash taxes, less capital expenditures, and less increases (plus decreases) in net
working capital, for the projected six months ended December 31, 2010, and fiscal years 2011
through 2014 and illustrative implied terminal values, using discount rates ranging from 13% to
15%. Simmons calculated illustrative terminal values for the Company based on multiples ranging
from, in the base case and low case scenarios, 4.0x to 6.0x, and in the high case scenario,
5.0x to 7.0x, in each case, of the Companys 2014 estimated EBITDA. Simmons derived the ranges of
these selected terminal value multiples based on its professional judgment and experience,
including its judgment on business characteristics of the Company relative to the other companies
identified under the captions Selected Companies Analysis and Selected Transactions Analysis
set forth above in this Schedule 14D-9, and other factors, including, but not limited to,
historical financial performance, profitability and scale of business.
Simmons calculated net working capital, defined as current assets (excluding cash) minus
current liabilities (excluding current portion of long-term debt and any other short-term debt), at
each period-end and assumed that its components intensity remained similar to historical results.
The change in this amount between periods was either subtracted or added as a component of
unlevered free cash flow.
The table set forth below describes, for each of the three projection cases, the following:
(1) Revenue for the projected six months ended December 31, 2010 and fiscal year 2011; (2) EBITDA
margins for the projected six months ended December 31, 2010 and fiscal year 2011; (3) capital
expenditures for the projected six months ended December 31, 2010 and fiscal year 2011; and (4)
undiscounted, unlevered free cash flows for the projected six months ended December 31, 2010 and
fiscal year 2011.
(Dollar amounts in millions)
|
|
|
|
|
|
|
|
|
|
|
2H 2010P
|
|
|
2011P
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Base Case
|
|
$
|
390.0
|
|
|
$
|
805.0
|
|
High Case
|
|
|
390.0
|
|
|
|
955.0
|
|
Low Case
|
|
|
390.0
|
|
|
|
689.3
|
|
|
|
|
|
|
|
|
|
|
EBITDA Margin:
|
|
|
|
|
|
|
|
|
Base Case
|
|
|
20.8
|
%
|
|
|
22.5
|
%
|
High Case
|
|
|
20.8
|
%
|
|
|
22.5
|
%
|
Low Case
|
|
|
20.8
|
%
|
|
|
18.2
|
%
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
Base Case
|
|
$
|
20.0
|
|
|
$
|
40.0
|
|
High Case
|
|
|
20.0
|
|
|
|
152.7
|
|
Low Case
|
|
|
20.0
|
|
|
|
40.0
|
|
|
|
|
|
|
|
|
|
|
Unlevered Free Cash
Flow:
|
|
|
|
|
|
|
|
|
Base Case
|
|
$
|
54.8
|
|
|
$
|
92.9
|
|
High Case
|
|
|
54.8
|
|
|
|
(21.1
|
)
|
Low Case
|
|
|
54.8
|
|
|
|
76.2
|
|
This analysis resulted in implied per share values ranging from $15.98 $25.07 in the
base case scenario, $26.05 $40.29 in the high case scenario, and $4.41 $7.96 in the low
case scenario.
The third full paragraph on page 25 is hereby amended and restated as follows:
Pursuant to the terms of its engagement with Simmons, the Company agreed to pay Simmons for
its financial advisory services in connection with the Offer and Merger an aggregate transaction
fee estimated to be approximately $9 million, a significant portion of which is contingent on the
acquisition by Purchaser of a majority of the outstanding Shares pursuant to the Offer. Simmons
also received a fixed fee of $500,000 for rendering its opinion as to the fairness of the Offer and
Merger, which fixed fee was payable without regard to the conclusions expressed in the opinion and
will be deducted from any contingent fee payable to Simmons on the acquisition by Purchaser of a
majority of the outstanding Shares pursuant to the Offer.
In addition, Simmons invoiced the Company for approximately $10,000 for reimbursable expenses
incurred in connection with the transaction with Parent. These expenses include reasonable
out-of-pocket expenses, including the fees and expenses of Simmons legal counsel, incurred in
connection with the engagement, including the delivery of the opinion. The Company also agreed to
indemnify Simmons against any losses or liabilities that may arise out of Simmons engagement.
Simmons has previously performed work for Parent. However, Simmons has not performed any work
for Parent during the last five years. Simmons has acted as financial advisor to the Company in
the past for the following transactions:
|
|
|
In 2005, Simmons acted as co-manager on the Companys initial public offering and
received approximately $640,000 in compensation, including expense reimbursement;
|
|
|
|
|
In 2006, Simmons acted as co-manager on the Companys follow-on equity offering and
received approximately $710,000 in compensation, including expense reimbursement;
|
|
|
|
|
In 2009, the Company engaged Simmons to provide certain financial advisory services,
including performing a market check to determine the interest level of prospective
candidates in a business combination. As part of the engagement agreement, Simmons
received approximately $75,000 in upfront compensation, which would be deducted from any
contingent fee payable upon consummation of a transaction;
|
|
|
|
|
In 2009, Simmons acted as co-manager on the Companys follow-on equity offering and
received approximately $170,000 in compensation, including expense reimbursement; and
|
|
|
|
|
In 2009, the Company engaged Simmons as financial advisor on a potential sale of the
Companys fluid logistics business. As part of the engagement agreement, Simmons did
not receive any upfront compensation, but invoiced the Company for approximately $3,000
in expense reimbursement.
|
SIGNATURE
|
|
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
|
|
|
|
|
|
|
SUPERIOR WELL SERVICES, INC.
|
|
|
By:
|
/s/ David E. Wallace
|
|
|
|
David E. Wallace
|
|
|
|
Chief Executive Officer
|
|
|
Dated: August 31, 2010
Superior Well Services (MM) (NASDAQ:SWSI)
Historical Stock Chart
From Sep 2024 to Oct 2024
Superior Well Services (MM) (NASDAQ:SWSI)
Historical Stock Chart
From Oct 2023 to Oct 2024