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Energy services see another takeover inked

Larry MacDougal/Larry MacDougal

You don't hear much about energy services firms that offer crucial support to oil and gas producers. Because they aren't the front-line producers, they typically don't attract much attention.

That's changing, at least just a little, as more takeovers are struck in the space. The latest is the buyout of Calgary-based HSE Ltd., which provides health and safety services to predominantly oil and gas clients. These services include well control, blowout recovery and emergency firefighting services.

The buyer is U.S.-listed DXP Enterprises Inc. , which offers maintenance and repair operations to industrial clients, and has been trying to expand in Canada.

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HSE is being purchased for $84-million, including debt, which means it isn't exactly a blockbuster deal. But the takeover comes on the heels of the takeouts of Palko and Flint Energy Services Ltd. , which are in the same space. With oil in the spotlight, getting comfy north of $100 (U.S.) per barrel, the services industry is seeing some consolidation.

As for health and safety in particular, it's one of the smaller subsets of energy services and there aren't many precedent transactions. Recent deals include Warburg Pincus buying Total Safety U.S. and the 2008 takeout of United Safety.

HSE is being purchased for $1.80 per share, a premium of about 60 per cent to its 30-day weighted-average trading price.

Could there be more deals? Possibly, but as always, it's a speculative game. Maxim Sytchev of AltaCorp Capital notes some mispricing in large caps like SNC-Lavalin and in micro-caps like Entrec Transportation Services and Phoenix Oilfield Hauling.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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