Business Context and Reporting Period
This Form 8-K, dated January 1, 2018, reports that Archrock, Inc. ("Archrock") and Archrock Partners, L.P. (the "Partnership") entered into an Agreement and Plan of Merger. The transaction involves a wholly owned subsidiary of Archrock merging with and into the Partnership, resulting in the Partnership becoming an indirect wholly owned subsidiary of Archrock.
Key Financial Metrics and Transaction Terms
The filing details the exchange ratio and termination fees but does not provide current revenue, profit, cash flow, or debt metrics for the reporting period.
- Exchange Ratio: Each outstanding Public Common Unit of the Partnership will be converted into the right to receive 1.40 shares of Archrock Common Stock.
- Incentive Distribution Rights: All of the Partnership's incentive distribution rights, owned indirectly by Archrock, will be canceled.
- Termination Fees:
- Archrock may be obligated to pay a termination fee of $10 million or reimburse Partnership expenses up to $2 million upon termination under certain circumstances.
- The Partnership may be obligated to reimburse Archrock for expenses up to $2 million upon termination under certain circumstances.
Material Changes and Conditions
The Merger Agreement outlines several conditions precedent to the completion of the transaction, including:
- Approval by holders of a majority of outstanding Partnership Common Units.
- Approval by a majority of Archrock Common Stock shares present at a special meeting.
- Expiration or termination of applicable Hart-Scott-Rodino Antitrust waiting periods.
- Effectiveness of a registration statement on Form S-4.
- Approval for listing on the New York Stock Exchange.
Archrock has agreed to vote all Partnership Common Units it beneficially owns in favor of the Merger. The boards of both entities have approved the agreement and recommend it to their respective security holders.
Outlook, Risks, and Contingencies
Management has identified several risks and contingencies that could impact the transaction or future performance:
- Transaction Risks: Failure to realize anticipated cost savings or synergies; diversion of management time; failure to obtain requisite approvals.
- Market Risks: Economic conditions and changes in the oil and gas industry, including sustained decreases in supply, demand, or prices.
- Legal and Regulatory Risks: Changes in tax laws affecting master limited partnerships; results of government reviews or investigations; shareholder actions related to the restatement of Archrock's financial statements.
- Financial Restatement: Potential additional costs relating to Archrock's restatement, cost-sharing with Exterran Corporation, and addressing regulatory proceedings.
Investors are advised to read the upcoming joint proxy statement/prospectus (Form S-4) for detailed information on risks and the transaction.
Key Facts for Investor Verification
- Verify the final approval status of the Merger by both Archrock stockholders and Partnership unitholders.
- Confirm the effectiveness of the Form S-4 registration statement and NYSE listing approval.
- Monitor developments regarding the restatement of Archrock's financial statements and associated costs or shareholder actions.
- Review the definitive joint proxy statement/prospectus for updated risk factors and financial projections.
- Assess the impact of current oil and gas market conditions on the combined entity's future cash flows.