Adams Resources & Energy, parent company of Service Transport Company, recently reacquired the shares of common stock held by the family of late founder Kenneth Stanley “Bud” Adams, Jr., and holding company KSA Industries, which is affiliated with the family.
The total purchase price was $70 million for 1,942,433 shares, or $36 per share.
“We have appreciated the long-standing relationship with the Adams family and wish them the best with future endeavors,” Adams CEO Kevin Roycraft said.
Bud Adams, better known as the founder and owner of the Houston Oilers/Tennessee Titans professional football team, started the wildcatting firm ADA Oil Company in 1947. ADA eventually grew into Adams Resources and went public in 1974. Today, it’s the parent of Service Transport, GulfMark Energy, Firebird Bulk Carriers, and Phoenix Oil.
By repurchasing his family’s shares of stock, Roycraft said Adams will save roughly $1.9 million in annual dividend payments. The family’s shares represented approximately $44.2% of Adams’ total outstanding stock. The $36 share price included a 10% premium over the year-to-date, weighted average daily close price as of Oct. 28, Adams said. Following the transaction, 2.45 million shares of Adams’ common stock still is outstanding.
The purchase was funded by a combination of existing cash on hand and a new term loan.
“We believe that by repurchasing the KSA and associated shares, along with the recent acquisition of Firebird and Phoenix, we have enhanced the value for all remaining shareholders,” Roycraft said. “This transaction will eliminate the perceived stock overhang, and given the fewer shares outstanding, will proportionally increase earnings per share.”
Additionally, the company entered a new five-year, $85 million credit agreement led by Cadence Bank. The new agreement replaces Adams’ existing three-year, $60 million facility and includes a $25 million term loan that amortizes over 10 years, with a balloon payment after five years and $60 million in revolving credit capacity. The new agreement includes letter of credit capacity of $30 million, or $10 million greater than the previous agreement.
The financial covenants under the new facility provide Adams with more operational flexibility than the prior agreement, the company said.
“We remain committed to capital discipline focusing on free cash flow, a healthy and disciplined balance sheet, and returning cash to shareholders through our dividend program,” Roycraft concluded.
“Our continued focus will be on growth opportunities adjacent to our current business.”