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U.S. Silica Snaps Up EP Minerals for $750M

One of the leading proppant providers in the onshore, U.S. Silica Holdings Inc., on Friday agreed to acquire EP Minerals, a complementary business, for $750 million.

EP, with sales of more than $200 million, is a global producer of engineered materials derived from industrial minerals including diatomaceous earth, clay and perlite.

“EP Minerals checks all of the boxes in terms of what we've been looking for in an attractive, adjacent business to our ISP segment,'' said CEO Bryan Shinn. ''It is a rare find with an attractive market structure and has industry-leading margins with exciting opportunities to grow sales.”

U.S. Silica now operates nine industrial sand production plants and eight oil and gas sand production plants that serve onshore customers across the United States.

Similar to U.S. Silica's Industrial and Specialty Products (ISP) segment, EP has transformed from a commodity-based business by adding higher-margin products to its mix, developing over 50 innovative new products in the last three years with 40 plus products in its new development pipeline today.

EP “leverages our core competencies as a premier surface mining and logistics company,” Shinn said. And its “reliable cash flow also complements our oil and gas segment while providing a robust platform for expansion and growth through organic opportunities and strategic bolt-on acquisitions."

EP’s industrial minerals are used as filter aids, absorbents and functional additives for a variety of industries including oil and gas, biofuels, food and beverage, recreational water, farm and home, landscape, sports turf, paint, plastics and insecticides. Facilities are in Nevada, Oregon, Nebraska, Tennessee, Alabama and Mississippi.

''We look forward to joining forces with U.S. Silica and benefiting from the strength of the company's mining expertise, differentiated logistics capabilities and ability to capture value throughout the supply chain,'' said EP CEO Gregg Jones. ''I also believe that there will be opportunities for our two companies to collaborate on research and development efforts” to bring new products to market faster.

U.S. Silica's ISP business is on track to grow through expanding its base business pricing and volume, acquiring bolt-ons in adjacent markets, and by developing and marketing higher margin products, Shinn said.

U.S. Silica plans to finance the transaction, and refinance its current debt through a new seven year, $1.28 billion committed credit facility and an expanded $100 million revolving credit facility.

The transaction is expected to be completed by mid-year and should be accretive in 4Q2018, said management.

Centerview Partners LLC served as investment banking adviser and Baker Botts LLP served as legal adviser to U.S. Silica.

In a note Friday, analysts with Tudor, Pickering, Holt & Co. Inc. (TPH) said the deal would help U.S. Silica to “smooth out the volatility inherent in energy cycles” with the EP deal. It should make the company “more” like the merger between proppant supplier Fairmount Santrol and Unimin Corp., which agreed to combine late last year.

EP’s revenues are 72% North America, 28% international, “and its operations appear fairly (or very) similar to sand mining,” said TPH.
Earlier this month U.S. Silica agreed to sell three transloads comprising about 70,000 tons of storage capacity in the Permian and Appalachian basins and the Eagle Ford Shale to CIG Logistics for $75 million, a deal set to close by the end of the month.

As part of the agreement, the company would continue to service customer needs through the transloads, which CIG would own and operate.

''This sale continues our successful strategy of utilizing outstanding partners, like CIG, to manage our transloading operations while we concentrate on delivering excellent customer service,” Shinn said.

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