Glass Lewis declined to meet with Dril-Quip
board and management and issued report that contains
unsubstantiated and misguided conclusions
Proposed transaction follows comprehensive
assessment of standalone and strategic alternatives and represents
value maximizing outcome for Dril-Quip stockholders
Dril-Quip Board unanimously recommends
stockholders vote “FOR” the transaction with Innovex at the
special meeting on September 5th, 2024
Dril-Quip, Inc. (NYSE: DRQ) (“Dril-Quip” or the “Company”) today
commented on the report issued by Glass, Lewis & Co. (“Glass
Lewis”) on August 23, 2024 and updated on August 27, 2024 in
connection with the Company’s proposed merger with Innovex Downhole
Solutions, Inc. (“Innovex”). Dril-Quip and its Board of Directors
strongly disagree with the review and recommendations issued by
Glass Lewis.
Dril-Quip and its Board of Directors believe the report should
be revised to address the unsubstantiated and misguided conclusions
and its disregard for the compelling rationale and financial
benefits of the transaction. Dril-Quip and its advisors have
repeatedly offered to hold discussions that would enable Glass
Lewis to develop a fully informed opinion regarding the proposed
merger with Innovex, but Glass Lewis has consistently declined to
engage with the Company. As a result, the Company believes the
Glass Lewis report provides a misguided review and recommendations
to Dril-Quip stockholders.
“We are surprised by Glass Lewis’s decision to publish its
recommendations without engaging in any dialogue with the Company,”
said John V. Lovoi, Dril-Quip’s Chairman of the Board. “The report,
issued without a prior meeting or discussion with the Company,
contains unsupported conclusions, and does not capture the
significant strategic and financial potential of this transaction.
A meeting would have provided an opportunity to address any
concerns and clarify the thoughtful and thorough process our Board
undertook in reaching its decision to recommend the merger to our
stockholders.”
Mr. Lovoi continued, “Dril-Quip and its Board of Directors
continue to believe that this proposed transaction with Innovex is
in the best interests of our stockholders. The Board is confident
the merger will deliver significant value and strategic benefits
that will enhance the Company’s long-term growth, resilience and
prospects.”
Glass Lewis’s Comments on the Review Process Lack Factual
Support: Dril-Quip and its Board of Directors Undertook a
Comprehensive Process
Prior to entering into the proposed merger agreement with
Innovex, Dril-Quip and its Board of Directors:
- Undertook a comprehensive assessment of various standalone and
strategic alternatives over the course of multiple years (which
included engaging in alternative counterparty discussions),
- Established a dedicated transaction committee to assist in the
review of alternatives,
- Contacted five additional prominent industry participants which
declined to engage in a transaction,
- Engaged two reputable financial advisors to assist the Company
in its review process, and
- Negotiated a merger agreement that ensured Dril-Quip retained
flexibility to accept a superior proposal received prior to receipt
of stockholder approval.
Glass Lewis’s report ignores the thorough process actually
undertaken by the Board.
Glass Lewis’s Recommendations Fail to Appropriately Consider
the Compelling Rationale and Financial Benefits of the
Transaction
Despite recognizing the “strategic and financial impetus for the
contemplated arrangement”1, Glass Lewis’s recommendations fail to
evaluate the compelling value outcome of the transaction relative
to the Company on a standalone basis. Instead, Glass Lewis seeks
support for its recommendations based on uninformed and misguided
process perspectives (as outlined above) and a small number of
other miscellaneous and isolated deal observations for which Glass
Lewis offers no or little explanation as to how it justifies its
recommendations. For example, the report mentions a special
dividend by Innovex in isolation, focusing on the beneficiary
rather than considering the overall context of the transaction, the
incremental pro forma ownership it provides to Dril-Quip’s
stockholders, or the fact that the combined company maintains a net
cash position. Moreover, Glass Lewis neglects to balance such
observations against the compelling rationale and financial
benefits of the transaction in any way.
The merger of Dril-Quip and Innovex is immediately and
significantly accretive on all metrics to Dril-Quip stockholders
and offers the following strategic merits:
- Positions the Company with a scaled and diversified global
market presence
- Establishes a curated portfolio of complementary,
mission-critical products
- Enables key market expansion through cross-selling and
accelerated penetration – lower 48, Canada, Saudi Arabia and global
offshore
- Unlocks significant and achievable cost synergies of
approximately $30 million per year
- Improves earnings stability, resilience and growth
- Maintains a net cash position for future investment and
acquisitions
- Facilitates best-in-class practices and leadership from the
respective companies
The Dril-Quip Board of Directors unanimously recommends that
Dril-Quip stockholders vote “FOR” the
transaction and each of the proposals to be considered at the
special meeting, which will be held on Thursday, September 5, 2024,
at 9:30 a.m. Central Time.
Following extensive discussions with stockholders, Dril-Quip and
Innovex withdrew the charter amendment proposal (Proposal No. 2)
and the related non-binding governance proposals (Proposal Nos. 3A
– F), eliminating the requirement that stockholders approve these
proposals as a condition of the closing of the merger. This
withdrawal reflects our responsiveness to stockholder input and
commitment to strong corporate governance practices.
Dril-Quip stockholders who have any questions concerning the
merger or the proxy statement/prospectus or would like additional
copies or need help voting their shares of Dril-Quip common stock,
please contact Dril-Quip’s proxy solicitor:
Morrow Sodali LLC 333 Ludlow Street, 5th Floor, South
Tower Stamford, Connecticut 06902 Stockholders may call toll-free:
(800) 662-5200 Banks and brokers may call collect: (203)
658-9400
Advisors
Citi is serving as lead financial advisor and Morgan Stanley
& Co. LLC is serving as co-financial advisor to Dril-Quip.
Gibson, Dunn & Crutcher LLP is serving as Dril-Quip’s legal
advisor.
Goldman Sachs & Co. LLC is serving as lead financial advisor
and Piper Sandler Companies is serving as co-financial advisor to
Innovex. Akin Gump Strauss Hauer & Feld LLP is serving as
Innovex’s legal advisor with assistance from Paul Hastings LLP.
About Dril-Quip
Dril-Quip is a leading developer, manufacturer and provider of
highly engineered equipment and services for the global offshore
and onshore oil and gas industry.
About Innovex Downhole Solutions, Inc.
Innovex designs, manufactures, and installs mission-critical
drilling & deployment, well construction, completion,
production, and fishing & intervention solutions to support
upstream onshore and offshore activities worldwide.
Cautionary Statement Regarding Forward-Looking
Statements
Statements contained herein relating to future operations and
financial results or that are otherwise not limited to historical
facts are forward-looking statements within the meaning of the
Securities Act of 1933, as amended (the “Securities Act”), and the
Securities Exchange Act of 1934, as amended, including, but not
limited to, those related to projections as to the anticipated
benefits of the proposed transaction, the impact of the proposed
transaction on Dril-Quip’s and Innovex’s businesses and future
financial and operating results, the amount and timing of synergies
from the proposed transaction, the combined company’s projected
revenues, adjusted EBITDA and free cash flow, accretion, business
and expansion opportunities, plans and amounts of any future
dividends or return of capital to stockholders and the closing date
for the proposed transaction, are based on management’s estimates,
assumptions and projections, and are subject to significant
uncertainties and other factors, many of which are beyond
Dril-Quip’s and Innovex’s control. These factors and risks include,
but are not limited to: the impact of actions taken by the
Organization of Petroleum Exporting Countries (OPEC) and non-OPEC
nations to adjust their production levels, risks related to the
proposed transaction, including, the prompt and effective
integration of Dril-Quip’s and Innovex’s businesses and the ability
to achieve the anticipated synergies and value-creation
contemplated by the proposed transaction; the risk associated with
Dril-Quip’s ability to obtain the approval of the proposed
transaction by its stockholders required to consummate the proposed
transaction and the timing of the closing of the proposed
transaction, including the risk that the conditions to the
transaction are not satisfied on a timely basis or at all and the
failure of the transaction to close for any other reason; the risk
that a consent or authorization that may be a required approval for
the proposed transaction is not obtained or is obtained subject to
conditions that are not anticipated; unanticipated difficulties or
expenditures relating to the transaction, the response of business
partners and retention as a result of the announcement and pendency
of the transaction; and the diversion of management time on
transaction related issues, the impact of general economic
conditions, including inflation, on economic activity and on
Dril-Quip’s and Innovex’s operations, the general volatility of oil
and natural gas prices and cyclicality of the oil and gas industry,
declines in investor and lender sentiment with respect to, and new
capital investments in, the oil and gas industry, project
terminations, suspensions or scope adjustments to contracts,
uncertainties regarding the effects of new governmental
regulations, Dril-Quip’s and Innovex’s international operations,
operating risks, the impact of our customers and the global energy
sector shifting some of their asset allocation from fossil fuel
production to renewable energy resources, and other factors
detailed in Dril-Quip’s public filings with the Securities and
Exchange Commission (the “SEC”). Investors are cautioned that any
such statements are not guarantees of future performance and actual
outcomes may vary materially from those indicated.
Important Information for Stockholders
In connection with the proposed merger of Dril-Quip and Innovex,
Dril-Quip filed with the SEC a registration statement on Form S-4
(as amended, the “Registration Statement”) on May 1, 2024 that
included a proxy statement/prospectus (the “Proxy
Statement/Prospectus”). The Registration Statement was declared
effective by the SEC on August 6, 2024. Dril-Quip filed the
definitive proxy statement/prospectus with the SEC on August 6,
2024, and it was first mailed to Dril-Quip’s stockholders on August
6, 2024. Dril-Quip has filed other relevant documents with the SEC
regarding the proposed merger, including a supplement to the Proxy
Statement/Prospectus on August 26, 2024. This document is not a
substitute for the Proxy Statement/Prospectus or Registration
Statement or any other document that Dril-Quip has filed with the
SEC. STOCKHOLDERS ARE URGED TO CAREFULLY READ THE REGISTRATION
STATEMENT, PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND
SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS THAT HAVE BEEN
FILED BY DRIL-QUIP WITH THE SEC IN THEIR ENTIRETY BECAUSE THEY
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Such
stockholders can obtain free copies of the Registration Statement
and Proxy Statement/Prospectus and other documents containing
important information about Dril-Quip, Innovex and the proposed
merger through the website maintained by the SEC at
http://www.sec.gov. Additional information is available on
Dril-Quip’s website, www.dril-quip.com.
1 Permission to use quotes neither sought nor obtained.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240827481620/en/
Investor Relations: Erin Fazio, Director of Corporate
Finance erin_fazio@dril-quip.com Dril-Quip Media Relations:
Sydney Isaacs / Chuck Dohrenwend Sydney.Isaacs@h-advisors.global /
Chuck.Dohrenwend@h-advisors.global H/Advisors Abernathy
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