Flotek Industries Inc (NYSE:FTK) stock soared Friday after agreeing to sell Florida Chemical Co LLC, its consumer and industrial chemistry technologies segment, to Archer Daniels Midland Company (NYSE:ADM) for $175 million in cash.
Houston-based Flotek will retain all of its patents after the deal.
Investors cheered the sale with Flotek Industries stock nearly doubling to $2.26 in afternoon trade.
As part of the agreement, Flotek and Archer Daniels Midland entered into “long-term reciprocal supply agreements.”
The first will secure Flotek's long-term supply of d-limonene, a component of citrus oils. Additionally, Flotek will manufacture differentiated chemistries for Florida Chemical's industrial customers. Finally, the companies will explore opportunities to develop next-generation chemistry technologies for the oil and gas and agricultural industries.
The deal is likely to be completed by the first quarter of 2019, subject to customary closing conditions.
Flotek expects the sale to have “a negligible cash tax effect” as the gain on the transaction will be offset by the company's outstanding operating losses.
"We believe the benefits of this transaction are extremely compelling on multiple fronts and in the best interest of our stakeholders,” said Flotek Industries CEO John Chisholm.
Deal brings synergies
“We are very excited about our long-term relationship with Archer Daniels Midland to develop opportunities to more fully leverage their high-performing portfolio of products to better serve the oil and gas market. This transaction has created a synergistic relationship that brings strategic benefits to each company,” he added.
Flotek develops and delivers reservoir-centric chemistry technologies to oil and gas clients designed. The company’s custom, full-fluid solutions to the upstream oil and gas industry are aimed at maximizing oil and gas recovery in both new and mature fields.
Contact Uttara Choudhury at [email protected]
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