DEF 14C: Enservco Corporation Stockholders Approve Acquisition of Buckshot Trucking and ELOC Share Issuance

Enservco Corporation's majority stockholders have approved the issuance of common stock for the acquisition of Buckshot Trucking and the issuance of shares under an equity line of credit with Keystone Capital Partners.

Summary

• Enservco Corporation is notifying stockholders about actions approved by the majority stockholders via written consent on June 25, 2024, in lieu of a special meeting.
• The approved actions include the issuance of shares for the acquisition of Buckshot Trucking, LLC, and the issuance of shares exceeding the exchange cap under the Common Stock Purchase Agreement with Keystone Capital Partners, LLC.
• The acquisition of Buckshot Trucking involves a purchase price of $5.0 million, consisting of $3.75 million in cash and $1.25 million in Enservco common stock, plus up to $500,000 in common stock contingent on certain conditions.
• Buckshot's 2023 unaudited EBITDA was approximately $2.3 million on revenue of approximately $8.2 million.
• The ELOC agreement with Keystone Capital Partners allows Enservco to sell up to $10.0 million of newly issued shares of common stock, or 19.99% of outstanding shares, with certain limitations.
• The company intends to use the net proceeds from the sale of ELOC shares for working capital, strategic purposes, and to fund a portion of the Buckshot acquisition.
• The actions will become effective 20 calendar days after the Information Statement is first mailed to stockholders as of the Record Date of June 25, 2024, with the mailing occurring on or about July 12, 2024.
• The majority stockholders, holding approximately 51.1% of the outstanding voting power, approved the actions, satisfying the requirements of the NYSE American Company Guide and Delaware General Corporation Law.

Sentiment

Score: 6

Explanation: The document is primarily informational, outlining approved actions. The acquisition is presented positively, but the potential for dilution and market price decline tempers the overall sentiment.

Positives

• The acquisition of Buckshot Trucking is expected to add a higher margin business with strong growth and cash generation.
• The acquisition will provide year-round prospective growth with operational and financial visibility.
• The acquisition will establish a new operating division that complements and expands current strong market position in hot oiling and acidizing services and frac water heating services, in addition to non-oil & natural gas customers.
• The ELOC agreement with Keystone Capital Partners enhances the company's liquidity and financial stability by providing access to additional capital as needed.
• Buckshot's 2023 unaudited EBITDA was approximately $2.3 million on revenue of approximately $8.2 million, a near doubling of Buckshots revenue since 2021.

Negatives

• Existing stockholders will experience dilution of their ownership percentage due to the issuance of Transaction Shares and ELOC Shares.
• The influx of shares into the public market could potentially have a negative effect on the trading price of the common stock.
• The company may need to sell shares of common stock in excess of the Exchange Cap at a price that is less than at market under applicable NYSE American Rules, which require stockholder approval pursuant to NYSE American Rule 713.

Risks

• The acquisition is subject to risks and uncertainties, including the ability of the company to raise sufficient capital to fund the cash portion of the purchase price.
• The company's ability to successfully integrate Buckshot's market opportunities, personnel, and operations, transition to a logistics business, and achieve expected benefits is uncertain.
• The company cannot predict the market price of its common stock at any future date, and therefore cannot predict the number of ELOC Shares to be issued under the ELOC Purchase Agreement or whether the market price for any issuance will be at market or greater.
• Investor may resell some or all of the ELOC Shares we issue to it under the ELOC Purchase Agreement and such sales could cause the market price of our Common Stock to decline.

Future Outlook

The company expects the Buckshot acquisition to close approximately 20 days following the mailing date of the Information Statement, providing Enservco with a growing business that is not weather dependent, empowering the company to enter steady year-round logistics, expand its operating footprint, and improve cash flow visibility.

Management Comments

• The Acquisition will strategically transform the Company by entering the logistics business with Buckshots immediately accretive logistics business.
• The founders of Buckshot, Tony Sims and Jim Fate, will continue to lead the Buckshot business.

Industry Context

Enservco is expanding its services into the logistics sector, diversifying its revenue streams and reducing reliance on weather-dependent oilfield services. This move aligns with a broader trend of energy companies seeking to optimize operations and expand into related industries.

Comparison to Industry Standards

• It is difficult to compare Enservco's acquisition of Buckshot to industry standards without knowing the specific terms of the deal and the financial performance of Buckshot relative to its peers.
• However, a general comparison can be made to similar acquisitions in the logistics and transportation sector, where multiples of EBITDA are often used to value companies.
• For example, acquisitions of trucking companies often occur at multiples of 5-7x EBITDA, so the implied multiple for Buckshot would need to be assessed to determine if it is in line with industry norms.
• Comparisons to companies like Landstar System or J.B. Hunt could provide benchmarks for revenue and profitability in the logistics sector.

Management Changes

Stakeholder Impact

• Existing stockholders will experience dilution of their ownership percentage.
• The acquisition is expected to benefit Enservco's customers by expanding its service offerings.
• The acquisition is expected to benefit Enservco's employees by providing new opportunities for growth and development.

Next Steps

• The acquisition of Buckshot Trucking is expected to close approximately 20 days following the mailing date of this Information Statement.
• The company will file a registration statement with the SEC for the purpose of registering for resale the shares issued pursuant to the Purchase Agreement within 60 days following the Acquisition closing date.
• The company will use commercially reasonable efforts to cause the registration statement covering the resale of the Initial Commitment Shares, the Back End Commitment Shares, and the maximum number of shares issuable under the Purchase Agreement to be declared effective within the earlier of 75 calendar days from the date of the Registration Rights Agreement if such registration statement is subject to review by the SEC and the 5th business day from the date the Company is notified by the SEC that such registration statement will not be reviewed.

Key Dates

Keywords

Enservco, Buckshot Trucking, Acquisition, ELOC, Keystone Capital Partners, Common Stock, Share Issuance, NYSE American, Stockholder Approval, Dilution