Archrock to acquireTotal Operations and Production Services for $983M

Archrock (AROK) and Total Operations and Production Services, a leading provider of contract gas compression services for the Permian Basin and portfolio company of investment funds managed by affiliates of Apollo Global Management APO) announced that they have entered into a definitive agreement under which Archrock will acquire TOPS, including approximately 580,000 horsepower of predominantly young electric motor drive compression assets, in a cash-and-stock transaction valued at $983M. Strategic and financial benefits include: enhances Archrock’s position in contract compression in the U.S., with pro forma operating horsepower of approximately 4.1M and a pro forma enterprise value exceeding $6B; increases Archrock’s Permian Basin compression capacity by 30% to approximately 2.2M operating horsepower, with the Company’s assets in the Permian Basin representing approximately 52% of its total operating horsepower; increases Archrock’s electric compression horsepower to approximately 648,000. Acquired assets are expected to generate approximately $136M of Q3 annualized adjusted EBITDA, exclusive of any anticipated synergies. Purchase price represents a transaction multiple of 7.3x Q3 annualized adjusted EBITDA. Under the terms of the agreement, Archrock will issue approximately 6.87M new Archrock common shares to the sellers. In addition, Archrock intends to fund the $826M cash portion of the total consideration with a combination of equity and debt, and with an approach consistent with the Company’s stated target leverage ratio range of between 3.0 times and 3.5 times. Following close of the transaction, TOPS will continue to be led by Brian Green. Archrock is committed to maintaining a dedicated presence in Midland, Texas, and no changes to the TOPS organization, personnel or operations are planned. The transaction has been unanimously approved by the Board of Directors of Archrock and is expected to close by the end of 2024, subject to customary regulatory approvals and other closing conditions.