Privatization Bid of Oilfield Services Firm STEP Fails

Oilfield services provider STEP Energy Services Ltd. and investor ARC Energy Fund 8 have mutually terminated a deal under which the private equity fund would buy STEP’s publicly issued shares.

Calgary, Canada-based ARC Financial Corp. (ARC), through ARC Energy Fund 8 and ARC Energy Fund 6, owns over 40,243,000 shares representing a 56.07 percent stake in STEP, according to STEP.

Under the all-cash transaction announced November 4, ARC was to acquire the remaining shares it did not already own for CAD 5 ($3.5) a unit. STEP would then delist from the Toronto Stock Exchange and operate as a private company.

“The decision to terminate the Agreement was made after it became clear that the requisite minority shareholder approval could not be achieved”, STEP said in a recent online statement.

No party accrued any liability from the failed process, according to STEP.

STEP president and chief executive Steve Glanville said, “We entered into this Agreement believing that this was in the best interest of STEP and delivered value to our STEP shareholders”.

“STEP has grown from a small upstart company in 2011 to one of the industry’s leading providers of coiled tubing and hydraulic fracturing services today”, Glanville added. “We are excited about what the future holds for our company.

“Our Canadian region is closing out its best ever year and despite the challenges in the U.S. market, our coiled tubing service line has grown market share by introducing cutting-edge technology to clients”.

“This outcome does not change our strategy for 2025 and onward”, said Glanville. “Our recently announced 2025 capital budget will continue to put STEP at the forefront of the evolving technology in this industry.

“We see some near-term margin pressure, but we have a constructive outlook on 2025, particularly as we see additional LNG capacity coming on stream in the second half of the year”.

ARC’s purchase price for STEP’s publicly issued shares represented a premium of about 40 percent to STEP’s November 1 closing price on the TSX. “The purchase price is in the upper third of the fair market value range of $4.40 to $5.30 per share, as determined by EY [Ernst & Young LLP]”, STEP said November.

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