Oil and gas engineering services business Plexus Holdings announced the sale of its wellhead exploration equipment and services business for Jack-Up applications to FMC Technologies, a subsidiary of TechnipFMC, on Thursday.
The AIM-traded company said that, in addition and as part of the transaction, Plexus, its subsidiary POSL and TFMC would also be entering into a collaboration agreement which would establish a framework to work together both on the development of existing POS-GRIP intellectual property for applications outside of jack-up exploration, as well as future new technologies.
It said the disposal followed the signing of a conditional business purchase agreement by Plexus, POSL and TFMC.
Under the terms of the agreement, the Plexus Group would receive an initial gross cash consideration of £15m, subject to certain adjustments, with an additional sum of up to £27.5m payable dependent on the future performance of the Jack-up business during a three-year earn-out period.
The earn-out had the potential to increase the total cash consideration to £42.5m, the Plexus board noted.
It added that the disposal was in line with its strategy of increasing industry awareness of its POS-GRIP friction grip technology, by initially focusing on proving the "superior qualities" of its equipment within the jack-up wellhead exploration market, where to-date its technology had been deployed on hundreds of wells worldwide, before targeting other markets such as surface production, subsea and de-commissioning.
The board said it believed that the disposal represented a "significant milestone" for the company as it demonstrated the attractiveness of POS-GRIP technology.
To facilitate a smooth transition of the Jack-up Business, the parties would also enter into a transitional services agreement through which the Plexus Group would provide certain services to TFMC on a transitional basis.
At the same time, Plexus and TFMC also agreed to enter into two licence agreements, one royalty-free and the other royalty bearing, which would deliver to TFMC the necessary intellectual property which was held by Plexus relating to the Jack-up business.
"I am pleased to announce this important transaction with TechnipFMC, one of the world's foremost oil and gas service companies," said Plexus CEO Ben Van Bilderbeek.
"I believe that the disposal and collaboration agreement with TechnipFMC opens up new opportunities for our technology."
Van Bilderbeek said TechnipFMC was acquiring a business which had supplied a "wide range" of blue chip operators of the calibre of BP, Centrica, ENI, Maersk, Royal Dutch Shell, Statoil, and Total with wellheads for use on hundreds of wells worldwide, and which already had a "strong" market reputation.
"Going forward there are numerous opportunities for the application of POS-GRIP technology and encouragingly, as the recent contract win from Centrica for the supply of surface production application equipment demonstrates, we are already making progress in this regard.
"We look forward to working closely with TechnipFMC to ensure the earn-out period is as successful as possible for both companies and also under the collaboration agreement with the potential to further develop our existing POS-GRIP IP for applications outside of the Jack Up exploration business.
"I will be working hard as CEO of Plexus with my team to grow the business and repeat the past success we have enjoyed in raising standards for HP/HT exploration wellheads in the wider energy sector, as well as focusing on generating shareholder value."
TechnipFMC's president of the surface technologies business, Richard Alabaster, said he was "very pleased" that his company reached the agreement, which fit within the division's strategy to "extend and strengthen" its position in exploration-drilling products and services while leveraging its global field presence.
"It also enhances TechnipFMC's capability in HP/HT applications."