Exterran to separate businesses into new publicly traded company

Exterran Holdings Inc.

The board of directors of Exterran Holdings Inc. (NYSE:EXH) has unanimously authorized management to pursue a plan to separate the company's international contract operations, international aftermarket services, and global fabrication businesses into a stand-alone, publicly traded company (SpinCo), resulting in two independent companies.

Upon completion of the transaction, Exterran Holdings (RemainCo) will be a pure-play US compression services business. RemainCo will hold interests in Exterran Partners LP (NASDAQ:EXLP), which include the sole general partner interest and certain limited partner interests that together currently represent a 37% ownership interest in Exterran Partners, as well as all of the incentive distribution rights in Exterran Partners. In addition, RemainCo will own and operate the remaining US contract operations and US aftermarket services businesses currently owned by Exterran Holdings. The operations of Exterran Partners will not be affected by the transaction.

SpinCo’s businesses will consist of Exterran Holdings’ current international contract operations and aftermarket services businesses, with operations in Latin America and parts of the Eastern Hemisphere, and its global fabrication business.

Brad Childers, Exterran Holdings’ president and CEO, said, "We believe creating two separate entities, each focused on its unique performance improvement and growth initiatives, will further enhance the competitive position of each business in the US and global oil and gas production infrastructure markets. This transaction will help ensure that each business has the management focus, financial strength, and flexibility to pursue its own independent strategic priorities.

"RemainCo will be a pure-play US compression services business with strong, stable cash flows from the distributions received from its general partner interests, including the associated incentive distribution rights, and limited partner interests in Exterran Partners and from the remaining businesses it will own. With limited capital requirements and limited debt at the parent level, RemainCo is expected to be well-positioned to return a significant portion of its stable cash flow to investors in the form of a recurring dividend. RemainCo anticipates continuing to pursue value-creating growth opportunities at Exterran Partners, including organic growth, third-party acquisitions and sales of additional contract operations assets from RemainCo to Exterran Partners, in order to continue to grow cash flow and dividends over time.

“SpinCo will also be well-positioned for long-term success, as a company that will benefit from the global energy infrastructure build-out through its international services and global fabrication businesses. We believe SpinCo’s strong cash flow profile coupled with an attractive balance sheet will enable it to pay a recurring dividend to its shareholders. SpinCo expects to continue focusing on growing its international contract operations business and pursuing growth in the fabrication and sale of our products in both the US and international markets."

Upon completion of the transaction, RemainCo and SpinCo will each have its own independent executive management team and board of directors. The board of directors of Exterran Partners’ managing general partner, including its conflicts committee, is anticipated to remain in place, with potentially some change in management representation on the board of directors post-transaction. Exterran Holdings is in the process of identifying the individuals who will be appointed to serve as executive officers and directors of each company.

Goldman, Sachs & Co. is acting as sole financial advisor and Latham & Watkins LLP is serving as legal advisor to Exterran on the transaction.

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