Why Cactus Is Buying FlexSteel (WHD)

By Noah Long ● Jan 3, 2023

Cactus (WHD) announced today that it entered into a definitive agreement to acquire FlexSteel Technologies Holdings and its affiliates through a merger with its holding company HighRidge Resources and Atlas Merger Sub, LLC, a newly formed subsidiary of Cactus. FlexSteel is a market-leading manufacturer of spoolable pipe technologies primarily purchased by customers during the production phases of a well’s lifecycle.

Cactus is buying FlexSteel on a cash-free, debt-free basis, for total upfront consideration of approximately $621 million, subject to customary purchase price adjustments. And the closing is expected to occur in early 2023 and is subject to regulatory approvals and other customary conditions. In addition to the upfront consideration, there is a potential future earn-out payment of up to $75 million to be paid in mid-2024 if certain revenue growth targets are met by FlexSteel.

FlexSteel’s current President and CEO, Thirucherai Sathyanarayanan, will continue to lead the business, which generated revenue of approximately $265 million for the nine months ended September 30, 2022.

Financing Details

Cactus has obtained fully committed bridge financing that it can use to fund the upfront purchase price together with cash on hand. And the company plans to finance the acquisition of FlexSteel through a mix of cash, debt and/or equity.

The company is targeting net debt to 2022 adjusted EBITDA for the combined company of less than 1.0x at closing and expects to reduce leverage through internal cash generation thereafter.


“This acquisition enhances Cactus’ position as a premier manufacturer of specialized technologies delivered directly to our industry’s end-users. FlexSteel’s products combine the durability and reliability of steel with the speed and efficiency of spoolables. FlexSteel shares many characteristics with Cactus, including: 1) technologically differentiated products and services that increase customer efficiency, 2) state of the art manufacturing capabilities, 3) strong through-cycle margins, 4) modest capital requirements and 5) significant growth in recent years. Both businesses have succeeded by making highly technical sales to market-leading customers. FlexSteel’s products are also highly complementary to Cactus’ equipment at the wellsite. As such, we believe this company meets the exacting criteria we have described over the last several years.”

“FlexSteel also provides meaningful growth potential driven by: 1) the industry’s shift away from legacy offerings in favor of more technologically advanced solutions, 2) customers’ trend toward larger diameter products and 3) penetration into new markets such as midstream, international, shallow-water, and carbon capture.”

“Over time, we expect to realize the benefits of cost efficiencies by implementing our existing supply chain expertise and utilizing the combined Company’s infrastructure to deliver specialized products to an expanded customer base.”

— Scott Bender, President and CEO of Cactus