GAMCO Opposes Dril-Quip’s Merger Scheduled for Vote September 5th
GAMCO Asset Management Inc., an affiliate of GAMCO Investors, Inc. (OTCQX: GAMI), plans to vote against the proposed merger between Dril-Quip, Inc. (NYSE: DRQ) and Innovex Downhole Solutions. GAMCO, owning 8.32% of Dril-Quip's shares, believes the company is worth more as a standalone entity. Since the merger announcement on March 18, 2024, Dril-Quip's stock has declined 37.5%, significantly underperforming the sector. GAMCO estimates Dril-Quip's 2025 private market value at $39 per share, citing concerns about dilution of Dril-Quip's offshore franchise and weakening of its strong balance sheet. The merger would shift Dril-Quip's revenue mix, increasing exposure to the slowing U.S. onshore market while reducing its offshore focus.
GAMCO Asset Management Inc., un'affiliata di GAMCO Investors, Inc. (OTCQX: GAMI), prevede di votare contro la fusione proposta tra Dril-Quip, Inc. (NYSE: DRQ) e Innovex Downhole Solutions. GAMCO, che possiede l'8,32% delle azioni di Dril-Quip, ritiene che l'azienda sia più preziosa come entità autonoma. Dall'annuncio della fusione del 18 marzo 2024, il titolo di Dril-Quip è sceso del 37,5%, subendo una significativa sotto-performance rispetto al settore. GAMCO stima il valore di mercato privato di Dril-Quip per il 2025 a 39 dollari per azione, sollevando preoccupazioni riguardo alla diluizione della franchigia offshore di Dril-Quip e al deterioramento del suo forte bilancio. La fusione cambierebbe il mix di entrate di Dril-Quip, aumentando l'esposizione al mercato onshore statunitense in rallentamento, mentre ridurrebbe il focus sull'offshore.
GAMCO Asset Management Inc., una afiliada de GAMCO Investors, Inc. (OTCQX: GAMI), planea votar en contra de la fusión propuesta entre Dril-Quip, Inc. (NYSE: DRQ) e Innovex Downhole Solutions. GAMCO, que posee el 8,32% de las acciones de Dril-Quip, cree que la empresa tiene más valor como entidad independiente. Desde el anuncio de la fusión el 18 de marzo de 2024, las acciones de Dril-Quip han caído un 37,5%, teniendo un rendimiento significativamente inferior al sector. GAMCO estima el valor de mercado privado de Dril-Quip para 2025 en 39 dólares por acción, citando preocupaciones sobre la dilución de la franquicia offshore de Dril-Quip y el debilitamiento de su sólido balance. La fusión cambiaría la mezcla de ingresos de Dril-Quip, aumentando la exposición al mercado onshore de EE.UU. que se desacelera, mientras reduce su enfoque offshore.
GAMCO Asset Management Inc., GAMCO Investors, Inc. (OTCQX: GAMI)의 자회사, 는 Dril-Quip, Inc. (NYSE: DRQ)와 Innovex Downhole Solutions 간의 합병 제안에 반대할 계획입니다. GAMCO는 Dril-Quip 주식의 8.32%를 소유하고 있으며, 회사를 독립적인 실체로서 더 가치있다고 믿고 있습니다. 2024년 3월 18일 합병 발표 이후 Dril-Quip의 주가는 37.5% 하락해, 산업의 큰 하락폭을 보였습니다. GAMCO는 Dril-Quip의 2025년 민간 시장 가치를 주당 39달러로 추정하며, Dril-Quip의 해외 프랜차이즈 희석 및 강력한 재무 상태 약화에 대한 우려를 언급했습니다. 이번 합병은 Dril-Quip의 수익 구조를 변화시켜, 미국 내륙 시장의 둔화에 대한 노출을 증가시키고, 해양 비즈니스에 대한 집중을 줄이는 결과를 가져올 것입니다.
GAMCO Asset Management Inc., une filiale de GAMCO Investors, Inc. (OTCQX: GAMI), prévoit de voter contre la fusion proposée entre Dril-Quip, Inc. (NYSE: DRQ) et Innovex Downhole Solutions. GAMCO, détenant 8,32% des actions de Dril-Quip, estime que l'entreprise vaut plus en tant qu'entité autonome. Depuis l'annonce de la fusion le 18 mars 2024, l'action Dril-Quip a chuté de 37,5%, sous-performant considérablement le secteur. GAMCO estime la valeur de marché privée de Dril-Quip pour 2025 à 39 dollars par action, en exprimant des inquiétudes sur la dilution de la franchise offshore de Dril-Quip et l'affaiblissement de son solide bilan. La fusion modifierait le mix de revenus de Dril-Quip, en augmentant l'exposition au marché américain terrestre en ralentissement tout en réduisant son accent sur l'activité offshore.
GAMCO Asset Management Inc., eine Tochtergesellschaft von GAMCO Investors, Inc. (OTCQX: GAMI), plant, gegen die vorgeschlagene Fusion zwischen Dril-Quip, Inc. (NYSE: DRQ) und Innovex Downhole Solutions zu stimmen. GAMCO, das 8,32% der Aktien von Dril-Quip besitzt, ist der Ansicht, dass das Unternehmen als eigenständige Einheit mehr wert ist. Seit der Ankündigung der Fusion am 18. März 2024 ist der Aktienkurs von Dril-Quip um 37,5% gefallen, was zu einer erheblichen Underperformance gegenüber dem Sektor führt. GAMCO schätzt den privaten Marktwert von Dril-Quip für 2025 auf 39 US-Dollar pro Aktie und äußert Bedenken hinsichtlich der Verwässerung von Dril-Quips Offshore-Franchise und der Schwächung seiner soliden Bilanz. Die Fusion würde die Umsatzstruktur von Dril-Quip verändern, indem sie die Exponierung gegenüber dem rückläufigen US-Onshore-Markt erhöht und den Offshore-Fokus verringert.
- GAMCO estimates Dril-Quip's 2025 private market value at $39 per share, significantly higher than current stock price
- Dril-Quip projects EBITDA increase from $71 million to $137 million between 2024 and 2028
- Dril-Quip forecasts cumulative free cash flow of $330 million (almost $10/share) by 2028
- Dril-Quip currently has $189.2 million of cash ($5.50 per share) and no debt
- Dril-Quip's stock price has declined 37.5% since merger announcement, underperforming sector
- Proposed merger would dilute Dril-Quip's offshore franchise, reducing offshore revenue mix
- Merger increases exposure to slowing U.S. onshore market
- Innovex's net debt and special dividend payment would weaken Newco's balance sheet
- Innovex's existing commitments, including acquisition plans, may further strain Newco's finances
GAMCO's opposition to the Dril-Quip-Innovex merger highlights significant concerns for investors. The 37.5% stock price decline since the announcement, compared to the sector's 8.3% drop, suggests market skepticism. Dril-Quip's projected EBITDA growth from
The merger's shift in revenue mix is a critical point for investors. Dril-Quip's current 60% offshore revenue, potentially rising to 75-80% in a normalized market, aligns with increasing offshore activity evidenced by rising project FIDs and tree awards. The proposed merger would reduce this to 39%, while increasing exposure to the U.S. land market at 33%. This strategic pivot comes at a time when U.S. onshore activity is plateauing, potentially limiting growth prospects. The
![Source: Dril-Quip Amendment to Form S-4 Registration Statement filed on 8/5/24, Page 106](https://mms.businesswire.com/media/20240814966689/en/2216530/4/GAMCO-table.jpg)
Source: Dril-Quip Amendment to Form S-4 Registration Statement filed on 8/5/24, Page 106
On March 18, 2024, Dril-Quip announced its intention to acquire and merge with Innovex. At the time of the announcement, Dril-Quip’s stock price was
We believe Dril-Quip is worth more as a standalone company. We believe Dril-Quip's intrinsic value is worth more than its current stock price. However, the company is planning to issue new shares near its all-time lows to fund the Innovex acquisition. According to Dril-Quip's projections in its merger proxy document filed with the SEC on August 5, 2024, Dril-Quip's financials are improving. Between 2024 and 2028, Dril-Quip projects its EBITDA will increase from
Among other issues the PVC considered were that Innovex dilutes Dril-Quip's offshore franchise. Dril-Quip's current revenue mix is
Additionally, the merger weakens Dril-Quip's strong balance sheet. As of June 30, 2024, Dril-Quip had
For all of these reasons, our PVC intends to vote “Against” the proposed merger.
GAMCO Investors, Inc., through its subsidiaries, manages assets of private advisory accounts (GAMCO), mutual funds and closed-end funds (Gabelli Funds, LLC) and is known for its Private Market Value with a Catalyst™ style of investment.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240814966689/en/
Robert Leininger
Chair, Proxy Voting Committee
(914) 921-7754
For further information please visit www.gabelli.com
Source: GAMCO Asset Management Inc.
FAQ
Why is GAMCO (GAMI) opposing the Dril-Quip merger scheduled for September 5th?
How has Dril-Quip's stock performed since the merger announcement with Innovex?
What is GAMCO's (GAMI) estimate for Dril-Quip's 2025 private market value?