Trio Merger Corp. (NASDAQ:TRIO; OTCBB:TRIOW)
(“Trio”) and privately-held SAExploration Holdings,
Inc. (“SAE” or the “Company”) today jointly announced that the
companies have entered into a merger agreement whereby SAE will
merge into a wholly owned subsidiary of Trio. SAE is a holding
company of various subsidiaries which cumulatively form a
geographically diversified seismic data acquisition company. SAE
provides a full range of 2D, 3D and 4D seismic data services to its
clients, including surveying, program design, logistical support,
data acquisition, processing, camp services, catering,
environmental assessment and community relations. The Company
services its multinational client base from offices in Canada,
Alaska, Peru, Columbia, Bolivia, Papua New Guinea, New Zealand and
Brazil.
Since its founding in Lima, Peru in 2006, SAE has expanded
rapidly by organic growth and two tuck in acquisitions. SAE and its
executive management team have built a reputation for successfully
operating in logistically complex geographies, such as mountains,
jungles and arctic regions, while maintaining a strong Quality,
Health, Safety and Environmental (“QHSE”) performance record. As a
result, SAE has garnered a blue chip customer list, including many
of the world’s large national and international oil companies.
SAE’s unaudited revenues for the first nine months of calendar
2010 and 2012 increased from $75.4 million to $209.3 million, a
compound annual growth rate (“CAGR”) of 66.6%. During this same
period, nine month EBITDA increased from $7.4 million to $26.9
million, a CAGR of 90.9%. At November 30, 2012, SAE’s backlog was
$248.3 million and it had $315.7 million in bids outstanding.
Please see accompanying summary unaudited financial tables for
additional information.
SAE’s financial information and data contained herein is
unaudited and/or were prepared by SAE as a private company and do
not conform to SEC Regulation S-X. Accordingly, such information
and data will be adjusted and presented differently in Trio’s
filings with the SEC. Furthermore, it includes certain financial
information, such as EBITDA (earnings before interest, taxes,
depreciation and amortization), not derived in accordance with
generally accepted accounting principles (“GAAP”). EBITDA is a key
metric SAE uses in evaluating its financial performance. EBITDA is
considered a non-GAAP financial measure as defined by
Regulation G promulgated by the SEC under the Securities Act
of 1933, as amended. SAE considers EBITDA important in evaluating
its financial performance on a consistent basis across various
periods. Due to the significance of non-cash and non-recurring
items, EBITDA enables SAE’s Board of Directors and management to
monitor and evaluate the business on a consistent basis. SAE uses
EBITDA as a primary measure, among others, to analyze and evaluate
financial and strategic planning decisions regarding future
operating investments and potential acquisitions. The presentation
of EBITDA should not be construed as an inference that SAE’s future
results will be unaffected by unusual or non-recurring items or by
non-cash items, such as non-cash compensation. EBITDA should be
considered in addition to, rather than as a substitute for, pre-tax
income, net income and cash flows from operating activities.
The Transaction
Merger Consideration
The SAE stockholders, in exchange for all of the common stock of
SAE outstanding immediately prior to the merger, will receive from
Trio:
- An aggregate of 6,448,413 shares of
Trio’s common stock;
- An aggregate of $7,500,000 in
cash;
- An aggregate of $17,500,000 in
promissory notes to be issued by Trio; and
- The right to receive up to an
additional 992,064 shares of Trio’s common stock if the following
EBITDA targets have been met:
EBITDA
Target
EBITDA Share
Range
Minimum
Maximum
Minimum
Maximum
Fiscal year ended 12/31/13 $46,000,000 $50,000,000 248,016 496,032
Fiscal year ended 12/31/14 $52,000,000 $56,000,000 248,016 496,032
Notes:
1 In the event that the EBITDA target is not met in any
particular year but the combined company’s cumulative EBITDA over
the two year period is between $98,000,000 and $106,000,000, the
SAE stockholders will be entitled to the pro rata number of EBITDA
Shares they would have been entitled to if each individual yearly
EBITDA targets were met.
2 EBITDA, which excludes acquisitions, is defined as income
before provision for income taxes, plus interest expense, less
interest income, plus depreciation and amortization, plus merger
related expenses and Trio’s expenses.
Additionally, Trio will pay to the Stockholder an aggregate of
$5,000,000 in cash for all of SAE’s outstanding shares of Series A
Preferred Stock.
The stockholders of SAE will not be able to publicly sell any of
the shares of Trio common stock that they receive upon closing of
the merger for twelve months after the closing, subject to certain
exceptions. After the merger, Trio’s board of directors will
consist of eight directors, of whom five will be selected by SAE
and three will be selected by Trio.
As a condition to entering into the Merger Agreement, SAE
required that Trio effectuate certain changes with respect to its
outstanding warrants. Accordingly, to accommodate such requirement
and induce SAE to enter into the Merger Agreement, Trio obtained
the written consent from registered holders of a majority of Trio’s
outstanding warrants (the “Consenting Warrant Holders”) to increase
the exercise price of such warrants to $12.00 per share and
increase the redemption price of such warrants to $15.00 per share.
Such amendments will become effective upon consummation of the
merger. Additionally, Trio has agreed to file a registration
statement on Form S-4 for the purpose of offering holders of Trio’s
warrants the right to exchange their warrants for shares of Trio
common stock, at the rate of ten warrants for one share of Trio
common stock (the “Warrant Exchange”). The parties will seek to
consummate the Warrant Exchange as soon as practicable after the
closing of the merger. The Consenting Warrant Holders have agreed
to participate in the Warrant Exchange with respect to the warrants
held by such holders. Any warrants remaining outstanding after the
consummation of the Warrant Exchange will continue to have the same
terms as currently set forth in such warrants except as modified by
the amendments to the exercise and redemption prices described
above. In addition, the holders of the Unit Purchase Options
("UPOs") to purchase 600,000 units (each consisting of one
share and one warrant) at $11.00 per unit which were issued to the
underwriters at the closing of Trio's initial public offering, have
agreed to exchange their UPOs for an aggregate of 100,000 shares at
the closing of the merger.
About SAE and Its
Markets
SAE is a Delaware corporation and maintains its headquarters in
Calgary, Canada, where it has an administrative staff of
approximately 60 professionals. The Company currently operates ten
to twelve crews globally, with approximately 600 permanent
employees and up to 7,000 seasonal employees. SAE's seismic data
solutions are used by many of the worlds largest and most
technically advanced oil and gas exploration and production
companies, including national oil companies, major integrated oil
companies, and large independent oil and gas companies.
Operating as a sub-sector of the $600 billion (est.) global
energy exploration & production industry, the seismic industry
represents a $16 to$19 billion worldwide annual revenue
opportunity. SAE’s seismic data solutions consist primarily of
seismic data acquisition and processing services on behalf of its
clients. Seismic data acquisition involves applying an energy
source at a surface location, analyzing the reflected energy, and
then creating high resolution images of complex underground
structures. These images are used primarily by oil and gas
companies to identify geologic structures favorable to the
accumulation of hydrocarbons, to reduce risk associated with oil
and gas exploration, to optimize well completion techniques, and to
monitor changes in hydrocarbon reservoirs. The Company fully
integrates seismic survey design, data acquisition, processing and
interpretation to deliver enhanced services to its clients. SAE
generates 100% of its revenue from the acquisition of proprietary
(contracted) seismic data and does not employ the common industry
practice of shooting unfunded or partially funded seismic data for
speculative libraries.
The Company provides seismic data acquisition on a worldwide
basis for land, transition zone and shallow water marine areas,
with particular strength operating in challenging environments and
delicate ecosystems. The process of acquiring seismic data in many
of the remote locales in which SAE often operates is quite complex
and logistically challenging. As a result, SAE has developed a
competency in transportation, lodging and community relations as
well as a reputation for environmental responsibility that the
Company believes distinguishes it from its peers.
Since its formation in Lima, Peru in 2006, the Company has
steadily diversified its operations geographically. The Company has
subsequently leveraged its experience working in the jungles of
Peru to expand into Columbia, Papua New Guinea, and Bolivia. In
2011, SAE made two tuck-in acquisitions in North America, initiated
operations in Alaska and Canada, reincorporated as a Delaware
corporation and moved its headquarters to Calgary, Canada. As
illustrated in the table below, this aggressive growth strategy has
provided SAE with a well diversified stream of revenues:
2012 Year to Date Revenue and EBITDA by Region1
United States2 Peru Columbia
Bolivia Canada SE Asia Revenue $83.7 $32.1
$34.7 $26.8 $26.5 $5.7 EBITDA
$16.6 $4.2 $1.5 $3.8 $7.1
-$0.4
Notes:
1 Unaudited Revenue and EBITDA for the 9 months ended September
30, 2012 do not include corporate and inter-company
eliminations
2 Substantially all of the United States Revenue and EBITDA was
generated in Alaska
Eric Rosenfeld, Chairman and CEO of Trio, commented, “We are
pleased that Trio’s Board of Directors, as well as our Special
Advisor, Joel Greenblatt, unanimously approved this transaction. We
believe that SAE represents everything we were searching for in a
merger opportunity. The Company has an attractive growth profile
and a compelling valuation, with lower Enterprise Value to forward
EBITDA multiples than the median of its publicly-traded
comparables, based on Trio’s liquidation value of approximately
$10.08 per share. We also think that SAE possesses numerous
sustainable competitive advantages, including an experienced
management team, a strong and loyal customer base, a niche in
logistically complex regions, and a leading QHSE track record.”
“The geographic diversity of SAE’s operations, backlog and
outstanding bid profile reflect our belief that the Company is well
positioned to capitalize on compelling growth opportunities, both
within its existing markets as well as in new markets such as
Brazil and the lower 48 states of the US. We believe this
transaction will give the Company capital to accelerate its organic
growth plans and the public currency to capitalize on attractively
priced acquisitions. We believe SAE is well positioned to grow and
deliver long term value to its shareholders.” continued Eric
Rosenfeld.
Joel Greenblatt, Trio’s Special Advisor said, “SAExploration is
just the type of company I like: a high quality business with
excellent management at a very attractive valuation.”
Jeff Hastings, Executive Chairman of SAE, stated, “We are
excited about the opportunity to consummate the TRIO - SAE merger.
SAE has enjoyed impressive growth for the past several years and
the additional capital provided through the merger will facilitate
further expansion in our core areas as well as provide higher
visibility in the marketplace.”
For additional information on the acquisition, see the Form 8-K
filed by Trio, that will be filed later today, which can be
obtained, without charge, at the Securities and Exchange
Commission's internet site (http://www.sec.gov). SAE website is
www.arbinc.com.
About Trio Merger Corp.
Trio was incorporated in Delaware on February 2, 2011 as a
blank check company whose objective is to effect a merger,
capital stock exchange, asset acquisition or other similar
business combination with an operating business. Trio’s initial
public offering was declared effective June 20, 2011 and was
consummated on June 24, 2011, receiving net proceeds of $57.43
million through the sale of 6.0 million units at $10.00 per unit
and $3.55 million from the sale of private placement warrants to
the initial stockholders and the underwriters. On June 24, 2011,
the underwriters exercised their over-allotment option and on June
27, 2011, the Company received net proceeds of $8.69 million from
the sale of 900,000 units. Each unit was comprised of one share of
Trio common stock and one warrant with an exercise price of $7.50.
Pursuant to a share repurchase plan, the Company repurchased a
total of 0.78 million shares of common stock at an aggregate
purchase price of $7.54 million. As of September 30, 2012, Trio
held $61.69 million in a trust account maintained by an independent
trustee, which will be released upon the consummation of the
business combination.
The closing of the acquisition is subject to approval by the
stockholders of Trio, and Holders of 496,032 or more of the shares
of Parent Common Stock issued in Parent’s initial public offering
of securities not exercising their rights to convert their shares
into a pro rata share of the Trust Fund in accordance with Trio’s
Charter Documents.
Trio and its directors and executive officers may be deemed to
be participants in the solicitation of proxies for the special
meeting of Trio stockholders to be held to approve the merger.
Stockholders are advised to read, when available, Trio’s
preliminary proxy statement/information statement and definitive
proxy statement/information statement in connection with the
solicitation of proxies for the special meeting because these
statements will contain important information. The definitive proxy
statement/information statement will be mailed to stockholders as
of a record date to be established for voting on the merger.
Stockholders will also be able to obtain a copy of the proxy
statement/information statement, without charge, by directing a
request to: Trio Merger Corp., 777 Third Avenue, 37th Floor, New
York, NY 10017. The preliminary proxy statement/information
statement and definitive proxy statement/information statement,
once available, can also be obtained, without charge, at the
Securities and Exchange Commission's internet site
(http://www.sec.gov).
This press release includes certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding future financial
performance, future growth and future acquisitions. These
statements are based on SAE’s and Trio’s managements’ current
expectations or beliefs and are subject to uncertainty and changes
in circumstances. Actual results may vary materially from those
expressed or implied by the statements herein due to changes in
economic, business, competitive and/or regulatory factors, and
other risks and uncertainties affecting the operation of SAE’s
business. These risks, uncertainties and contingencies include:
business conditions; weather and natural disasters; changing
interpretations of GAAP; outcomes of government reviews; inquiries
and investigations and related litigation; continued compliance
with government regulations; legislation or regulatory
environments; requirements or changes adversely affecting the
business in which SAE is engaged; fluctuations in customer demand;
management of rapid growth; intensity of competition from other
providers of seismic acquisition services; general economic
conditions; geopolitical events and regulatory changes; the
possibility that the merger does not close, including due to the
failure to receive required security holder approvals or the
failure of other closing conditions; and other factors set forth in
Trio’s filings with the Securities and Exchange Commission. The
information set forth herein should be read in light of such risks.
Further, investors should keep in mind that SAE’s financial results
are unaudited and do not conform to SEC Regulation S-X and as a
result such information may fluctuate materially depending on many
factors. Accordingly, SAE’s financial results in any particular
period may not be indicative of future results. Neither Trio nor
SAE is under any obligation to, and expressly disclaims any
obligation to, update or alter its forward-looking statements,
whether as a result of new information, future events, changes in
assumptions or otherwise.
SAEXPLORATION SELECTED INCOME STATEMENT
DATA($ in millions)(unaudited)
(U.S. dollars in thousands)
2010 2011
YTD 2012(1)
Revenue $ 140,521 $ 178,210 $ 209,300 Direct operating
expenses 118,938 151,618 163,046
Gross profit 21,582 26,592 46,254 Selling,
general, and administrative expenses 6,865 16,117 19,585
Depreciation expense 177 190 8,483 (Gain) Loss on sale of assets
(515 ) (2 ) 186 Income from
operations 15,056 10,287 18,000 Other income (expense):
Other (income) expense, net 3,822 66 77 Interest (income) expense,
net 674 624 1,471 Foreign exchange (gain) loss, net 262
(150 ) (522 ) Total other (income)
expense, net 4,759 540 1,026
Income before income taxes 10,297 9,747 16,974
Provision for income taxes 1,206 2,994
6,727
Net income $ 9,091
$ 6,753 $ 10,246
EBITDA
reconciliation
Net income $ 9,091 $ 6,753 $ 10,246 Provision for
income taxes 1,206 2,994 6,727 Interest (income) expense, net 674
624 1,471 Depreciation and amortization 3,493
4,110 8,483
EBITDA $
14,464 $ 14,481 $
26,928
____________________________
(1) For period January 1, 2012 through September 30, 2012
SAEXPLORATION BALANCE SHEET($ in
millions)(unaudited)
(U.S. dollars in thousands)
2010 (1)
2011 (1)
2012 (2)
Current assets Cash and cash equivalents $ 7,232 $ 4,978 $ 13,921
Restricted cash 176 108 3,700 Accounts receivable 22,956 33,872
54,421 Prepaid expenses 5,497 2,589 7,542 Deferred expenses on
contracts 2,996 3,000 3,380 Deferred tax asset, net 728 2,270 1,252
Other current assets 675 - -
Total current assets 40,259 46,817 84,216
Property and equipment, net 9,695 41,583 50,807 Goodwill and other
intangible assets, net - 3,813 3,765 Other assets -
1,921 - Total assets $ 49,954
$ 94,134 $ 138,788 Current liabilities
Accounts payable $ 23,099 $ 44,216 $ 28,589 Accrued liabilities
5,619 2,723 11,277 Income and other taxes payable 4,566 3,964
12,304 Accrued payroll and related liabilities 2,739 2,383 6,983
Notes payable 3,607 7,393 21,238 Deferred revenue - current portion
- 3,756 6,389 Capital lease - current portion -
915 814 Total current
liabilities 39,630 65,350 87,592 Capital leases -
non-current portion - 1,669 1,177 Deferred revenue - non-current
portion - 6,429 4,293 Deferred tax liabilities, net 146 1,553 -
Long-term debt - - 15,693
Total liabilities 39,776 75,001 108,755 Total
shareholders' equity 10,178 19,133
30,034 Total liabilities and shareholders'
equity $ 49,954 $ 94,134 $ 138,788
______________________
(1) Fiscal years ending December 31(2) Balance sheet data as of
September 30, 2012
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