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Dril-Quip (DRQ) Faces Strong Opposition to Innovex Merger
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Dril-Quip, Inc. is encountering significant resistance to its proposed merger with Innovex Downhole Solutions. GAMCO, which holds 8.32% of Dril-Quip’s outstanding shares, has publicly declared its intention to vote against the merger.
Institutional Shareholder Services (“ISS”) has issued a mixed recommendation on the merger, advising shareholders to vote in favor of issuing shares for the merger but against amending Dril-Quip’s certificate of incorporation.
ISS expressed concerns that the proposed amendments primarily benefit Amberjack Partners, the majority owner of Innovex, rather than existing Dril-Quip shareholders. Despite these concerns, Dril-Quip has urged full support for the merger, a move criticized by some as misleading, given the conditional nature of ISS’s endorsement and the underlying governance issues.
The merger, which would see Dril-Quip and Innovex combine under the Innovex Downhole Solutions name, is expected to create a more resilient earnings profile capable of weathering industry cycles. However, the terms of the merger have raised eyebrows. Innovex and Amberjack Partners would assume control of the combined company without offering a control premium to Dril-Quip shareholders.
The new board structure would consist of up to nine directors, with Amberjack appointing four members and Innovex’s CEO, while Dril-Quip would appoint the remaining four, effectively handing the majority control to Innovex and Amberjack.
Adding to the controversy, Dril-Quip’s CEO Jeff Bird and CFO Kyle McClure are poised to receive substantial compensation packages due to the change of control triggered by the merger. Bird is expected to receive $8.1 million, whereas McClure stands to receive $3.8 million.
The merger’s future remains uncertain as shareholders prepare to cast their votes, with significant opposition and governance concerns still looming large.
Zacks Rank & Key Picks
Dril-Quip currently carries a Zack Rank #3 (Hold).
MPLX LP (MPLX - Free Report) derives stable fee-based revenues from long-term contracts, with minimal exposure to commodity-price fluctuations. The partnership’s robust capital expenditure forecast for 2024, along with significant expansion initiatives, underscores its commitment to sustainable growth.
The Zacks Consensus Estimate for MPLX’s 2024 EPS is pegged at $4.24. The company has a Zacks Style Score of B for Value and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
CrossAmerica Partners LP (CAPL - Free Report) is in the business of wholesale distribution of motor fuels, operating convenience stores, and owning and leasing real estate used in the retail distribution of motor fuels.
The Zacks Consensus Estimate for CAPL’s 2024 EPS is pegged at 17 cents. The company has a Zacks Style Score of A for Value and Momentum, and B for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
TechnipFMC plc (FTI - Free Report) posted second-quarter 2024 adjusted earnings of 43 cents per share, which beat the Zacks Consensus Estimate of 31 cents and increased from the year-ago quarter’s reported figure of 10 cents. The improvement can be attributed to a better-than-expected performance in the Subsea segment.
The Zacks Consensus Estimate for 2024 earnings per unit is pegged at $1.34. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days. The company has a Zacks Style Score of A for Growth and B for Value and Momentum.
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Dril-Quip (DRQ) Faces Strong Opposition to Innovex Merger
Dril-Quip, Inc. is encountering significant resistance to its proposed merger with Innovex Downhole Solutions. GAMCO, which holds 8.32% of Dril-Quip’s outstanding shares, has publicly declared its intention to vote against the merger.
Institutional Shareholder Services (“ISS”) has issued a mixed recommendation on the merger, advising shareholders to vote in favor of issuing shares for the merger but against amending Dril-Quip’s certificate of incorporation.
ISS expressed concerns that the proposed amendments primarily benefit Amberjack Partners, the majority owner of Innovex, rather than existing Dril-Quip shareholders. Despite these concerns, Dril-Quip has urged full support for the merger, a move criticized by some as misleading, given the conditional nature of ISS’s endorsement and the underlying governance issues.
The merger, which would see Dril-Quip and Innovex combine under the Innovex Downhole Solutions name, is expected to create a more resilient earnings profile capable of weathering industry cycles. However, the terms of the merger have raised eyebrows. Innovex and Amberjack Partners would assume control of the combined company without offering a control premium to Dril-Quip shareholders.
The new board structure would consist of up to nine directors, with Amberjack appointing four members and Innovex’s CEO, while Dril-Quip would appoint the remaining four, effectively handing the majority control to Innovex and Amberjack.
Adding to the controversy, Dril-Quip’s CEO Jeff Bird and CFO Kyle McClure are poised to receive substantial compensation packages due to the change of control triggered by the merger. Bird is expected to receive $8.1 million, whereas McClure stands to receive $3.8 million.
The merger’s future remains uncertain as shareholders prepare to cast their votes, with significant opposition and governance concerns still looming large.
Zacks Rank & Key Picks
Dril-Quip currently carries a Zack Rank #3 (Hold).
Investors interested in the energy sector may look at some better-ranked stocks mentioned below. These three companies presently carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
MPLX LP (MPLX - Free Report) derives stable fee-based revenues from long-term contracts, with minimal exposure to commodity-price fluctuations. The partnership’s robust capital expenditure forecast for 2024, along with significant expansion initiatives, underscores its commitment to sustainable growth.
The Zacks Consensus Estimate for MPLX’s 2024 EPS is pegged at $4.24. The company has a Zacks Style Score of B for Value and Momentum. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
CrossAmerica Partners LP (CAPL - Free Report) is in the business of wholesale distribution of motor fuels, operating convenience stores, and owning and leasing real estate used in the retail distribution of motor fuels.
The Zacks Consensus Estimate for CAPL’s 2024 EPS is pegged at 17 cents. The company has a Zacks Style Score of A for Value and Momentum, and B for Growth. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.
TechnipFMC plc (FTI - Free Report) posted second-quarter 2024 adjusted earnings of 43 cents per share, which beat the Zacks Consensus Estimate of 31 cents and increased from the year-ago quarter’s reported figure of 10 cents. The improvement can be attributed to a better-than-expected performance in the Subsea segment.
The Zacks Consensus Estimate for 2024 earnings per unit is pegged at $1.34. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days. The company has a Zacks Style Score of A for Growth and B for Value and Momentum.