KPS Buys Baker Hughes Rod Lift Business

KPS Capital Partners has agreed to acquire the Lufkin rod lift business from publicly traded Baker Hughes.

Lufkin is a provider of rod lift products, technologies, and services that are used in the energy sector to pump oil and gas to the surface through the use of artificial pressure. Lufkin’s products include surface pumping units, downhole sucker rod pumps, automated control and optimization equipment, and related software. Lufkin has six manufacturing and assembly facilities worldwide and is headquartered near Houston in Missouri City, Texas.

Lufkin was founded in 1902 as the Lufkin Foundry and Machine Company and was acquired in 2013 by General Electric’s (GE) oil and gas division for $3.3 billion. In July 2017, GE acquired Baker Hughes and merged it with its oil and gas division. Baker Hughes (NYSE: BKR) was spun out of GE in 2019 as a publicly-traded company.

Lufkin’s power transmission business will remain part of the Baker Hughes portfolio and is not included in the transaction with KPS.

“We are excited to create an independent Lufkin,” said Michael Psaros, co-founder and co-managing partner of KPS. “KPS will build a successful energy platform on the foundation of Lufkin’s legendary brand name, unparalleled reputation for reliability, superior technology and global footprint.”

“We are confident in our future as an independent company under KPS’ ownership,” said Andy Cordova, the general manager of the Lufkin rod lift business. “KPS is an ideal partner with a demonstrated decades-long track record of creating and building industry-leading companies.”

KPS Capital Partners makes control investments in manufacturing and industrial companies across a range of industries, including basic materials, branded consumer, healthcare, automotive parts, capital equipment, and general manufacturing. Many of KPS’s investments involve creating new companies to buy underperforming or distressed assets, companies operating in bankruptcy or in default of obligations to creditors, or with a history of recurring operating losses.

In October 2019, after just four weeks of fundraising, KPS held a first, final, hard cap and oversubscribed closing of KPS Special Situations Fund V LP and KPS Mid-Cap Fund LP. KPS Fund V had a $5 billion target and a $6 billion hard cap, and KPS Mid-Cap had a $750 million target and a $1 billion hard cap. KPS is headquartered in New York City with additional offices in Frankfurt and Amsterdam.

“The historic dislocation in current global and domestic energy markets has created an extraordinary investment opportunity for an investor like KPS,” added Mr. Psaros. “KPS Partner Ryan Baker will lead a team to acquire complementary technologies and products that serve the upstream sector of the energy industry in partnership with Lufkin’s management team. Lufkin will benefit from being a debt-free business with access to the significant financial resources of KPS.”

Baker Hughes (NYSE: BKR) provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production, and reservoir consulting. The company is headquartered in Houston.

Citi and Tudor, Pickering, Holt & Co. were the financial advisors to Baker Hughes on this transaction.

Completion of KPS’s buy of the Lufkin rod lift business is expected to close by mid-year 2020.

© 2020 Private Equity Professional | May 5, 2020

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