Sentinel to buy Strike Capital majority stake, form publicly traded Strike Inc.
Sentinel Energy Services, an energy-focused special purpose acquisition company led by Chairman Andrew Gould and CEO Krishna Shivram, and sponsored by an affiliate of CSL Capital Management, announced it has entered into a definitive agreement to acquire a majority interest in Strike Capital, which owns and operates Strike, a North America infrastructure and integrity services and projects business. The transaction is subject to approval by the Sentinel shareholders and other customary closing conditions. The combined company will have an anticipated initial total enterprise value of approximately $854M. Upon completion of the business combination, which is expected to occur during the first quarter of 2019, Sentinel will be renamed Strike Inc. and is expected to trade on the NYSE under a new ticker "STRK". Sentinel has also obtained commitments for a $150M PIPE investment at $10 per share, including a cash commitment of $110M by Fidelity Management and Research Company and $40M investment by Sentinel's sponsor, CSL Capital Management L.P. and certain of its investment funds, comprising a cash commitment of $22M and the contribution of a mid-stream pipeline services business, Invacor, valued at $18M. These investments will be used to enhance Strike's balance sheet following the acquisition. Strike management will retain 75% of their existing ownership stake while OEP will retain 80% of their existing ownership stake in Strike Capital. The business combination values Strike at a 5.4x 2019 projected adjusted EBITDA, implying a discount of approximately 32% to publicly traded peers. Cash proceeds from the business combination, including the PIPE investment, is expected to be up to $477M and will be utilized to pay $124M to existing shareholders with the remaining available cash being available to pay off the existing term loan and revolver facilities in their entirety. The resulting strong balance sheet with net cash on hand and approximately $200M of available liquidity will allow Strike to take advantage of several growth opportunities in the robust pipeline infrastructure services market and to provide working capital needs. Prior to completion of the business combination, Sentinel is expected to re-domesticate from the Cayman Islands to Delaware. STNL STRK