Sheffield-based company acquired in $125M deal

A local business has been acquired in a deal worth approximately $125 million.

Hi-Crush Partners LP, a Houston-based producer of sand used in fracking operations, announced that it has entered into an agreement to acquire Sheffield-based independent sand distributor D&I Industries LLC.

Under the agreement, Hi-Crush will acquire D&I for $95 million in cash and 1.579 million trading units valued at $19 each, or a total of just over $30 million worth of trading units.

Hi-Crush produces monocrystalline sand which is used as a proppant to enhance recovery of hydrocarbons from oil and natural gas wells. The company’s reserves are located in Wyeville, Wis. and produce “Northern White” sand.

D&I is the largest independent frac sand distributor in the Marcellus and Utica shale regions and operates a primarily rail-served logistics network network of terminals stretching from midwestern sand supply sources to destination terminals located throughout Pennsylvania, Ohio and New York. D&I’s has experience with four mainline railroads into the region which connect with short-line railroads to form the highest terminal capacity system in the region. D&I also brings existing relationships with frac sand producers into the deal.

“Under the Hi-Crush acquisition agreement, they have provided assurance they will be keeping the headquarters in Sheffield,” D&I Managing Member Arthur Stewart said. “Some of us are staying on and some of us are changing our capacities. I am ratcheting down to just a consultant. Our middle management team will stay very similar. We fully expect we will be growing our staff.”

Stewart is one of four D&I co-founders.

Following the acquisition, Hi-Crush will control the largest distribution network in the Marcellus and Utica shale regions. The company will be able to produce, transport, market and distribute “Northern White” sand under one roof.

The Hi-Crush distribution network will integrate 12 destination terminals across the Marcellus and Utica regions, five midwest origin transload rail terminals, terminal facilities close to well well heads and long-term relationships with multiple suppliers and railroads.

“The acquisition will double the size of Hi-Crush’s employee base, geographic footprint and asset base,” according to the release.

“We are very excited to bring the Hi-Crush and D&I teams together as this transaction will enhance out long-term revenue growth, margin potential and market share, creating substantial value for our unit holders,” Co-CEO of Hi-Crush Bob Rasmus said in the release. “Our businesses are highly complimentary, bringing together the leading independent frac sand distributor in the Marcellus and Utica shales with a pure-play, low-cost, domestic producer of premium monocrystalline sand. This transaction will transform our business model and customer service capabilities as we expand and improve our logistics and distribution network and take our expertise into other shale plays. We are now well-positioned to deliver our high-quality sand where, when and how our customers want it, and at the best price. This transaction also gives us a clear path to grow distributions to our unit holders.”

D&I Managing Member Bill Fehr, who is also a company co-founder, also expressed optimism.

“We are pleased to find a high-quality partner in Hi-Crush and look forward to combining our capabilities, infrastructure and human capital to continue to grow the business,” Fehr said in the Tuesday release. “The combination will deliver clear benefits for both companies’ customers who will see improved service and operational efficiencies.”

The combined company of Hi-Crush and D&I’s 2012 revenues would have been approximately $180 million, with $66 million of operating income revenue and operating income margins of approximately 37 percent, according to the release.

The acquisition, which is subject to regulatory approval and closing conditions, is expected to be completed in the second quarter of this year.