Cactus, Inc. Announces Transformative Acquisition of Baker Hughes Pressure Control LLC: Key Financial Impacts and Shareholder Takeaways

Overview of the Transaction

Cactus, Inc. (“Cactus” or the “Company”) has completed a major acquisition by purchasing a 65% controlling interest in Baker Hughes Pressure Control LLC (“SPC”), a subsidiary of Baker Hughes Holdings LLC. The transaction, executed under the Framework Agreement dated June 2, 2025, closed on January 1, 2026. The deal was valued at \$382 million, consisting of \$371 million in cash paid at closing (funded with cash on hand) and \$11 million in deferred consideration payable on the first anniversary of closing. This strategic acquisition positions Cactus as the accounting acquirer and gives it a controlling financial interest in SPC.

Key Financial Highlights and Pro Forma Impact

• Purchase Price Allocation: The preliminary purchase price of \$382 million is based on the estimated fair value of SPC’s assets and liabilities. Of note, \$150 million is classified as mezzanine equity for the non-controlling 35% interest held by Baker Hughes Pressure Control Holdings LLC, due to certain redemption features that are not solely within Cactus’s control.
• Assets Acquired and Liabilities Assumed:
  • Total assets acquired are valued at \$713.7 million, including \$146.2 million in inventories, \$221 million in accounts receivable, and \$190.2 million in identifiable intangible assets (customer relationships, developed technology, and backlog).
  • Total liabilities assumed stand at \$259.4 million, including \$182 million in current liabilities and \$47.4 million in deferred tax liabilities.
  • Goodwill generated from the acquisition is recorded at \$95.3 million, reflecting the excess of purchase price over the fair value of net assets, primarily attributed to international market expansion and product diversification.
• Balance Sheet Effects:
  • Cash and cash equivalents decrease by \$371 million (purchase consideration), but the joint venture retains a minimum of \$70 million in cash at closing.
  • Inventory and property, plant, and equipment receive fair value step-ups, impacting future depreciation and cost of goods sold.
  • Intangible assets are recorded at \$190.2 million, with customer relationships valued at \$137.6 million (15-year life), developed technology at \$46.7 million (10-year life), and backlog at \$5.9 million (1-year life).
  • Non-controlling interests are recognized, with \$150 million in mezzanine equity and \$17.5 million for other non-controlling interests in subsidiaries.

Pro Forma Income Statement Effects

• For the Nine Months Ended September 30, 2025:
  • Pro forma revenues rise to \$1.29 billion (Cactus: \$817.8 million; SPC: \$469 million).
  • Operating income is \$277.7 million after \$17.9 million in pro forma transaction-related adjustments and costs.
  • Net income attributable to Cactus Inc. grows to \$158.3 million, with basic earnings per share (EPS) at \$2.31 and diluted EPS at \$2.30.
• For the Year Ended December 31, 2024:
  • Pro forma revenues reach \$1.63 billion (Cactus: \$1.13 billion; SPC: \$503 million).
  • Operating income is \$324.5 million after \$63.1 million in pro forma adjustments and costs.
  • Net income attributable to Cactus Inc. is \$195.4 million, with basic EPS at \$2.94 and diluted EPS at \$2.93.
• Key Adjustments:
  • Increased depreciation and amortization expenses due to stepped-up asset values and new intangible assets (\$1.4 million and \$13 million annually, respectively).
  • Inventory step-up costs will flow through cost of goods sold within 12 months of closing, impacting margins in the short term.
  • Non-recurring transaction expenses of \$3.8 million are accrued in Q4 2025, on top of \$7.1 million already incurred.
  • Income tax provision is adjusted for new ownership structure; SPC will be treated as a disregarded entity for tax purposes.
  • Transition Service Agreement expenses (up to \$10 million annually) will temporarily raise SG&A as Baker Hughes provides post-closing IT, finance, and commercial support for up to 24 months.

Shareholder Considerations and Potential Share Price Impact

• Significant Expansion: This acquisition is transformative, nearly doubling Cactus’s revenue base and expanding its international footprint, product lines, and end-market exposure. The addition of SPC’s technology and customer relationships is expected to drive long-term growth and margin expansion.
• Balance Sheet and Earnings: The transaction is funded entirely with cash on hand, resulting in a substantial decrease in cash reserves but no new debt. The substantial increase in goodwill and intangible assets may raise concerns about future impairment risk, but is also a testament to the strategic value of the deal.
• Complex Ownership Structure: The presence of \$150 million in mezzanine equity (non-controlling interest with special redemption rights) and \$17.5 million in non-controlling interests could impact earnings allocation and capital structure until resolved.
• PPA Not Final: The purchase price allocation remains preliminary and could be materially revised over the next year as final asset appraisals and working capital adjustments are completed. Further changes could impact reported goodwill, deferred taxes, and future earnings.
• One-Time Costs and Synergies: The pro forma statements do not include any estimates for revenue synergies, cost savings, or restructuring charges—investors should monitor future disclosures for updates on integration progress.
• Potential Valuation Impact: The magnitude and structure of this deal, the nearly doubled revenue base, and the large step-up in intangible assets and goodwill are all likely to be price sensitive. Investors should expect increased volatility as the market digests the implications for Cactus’s growth profile, capital allocation, and post-acquisition performance.

What Investors Should Watch

• Updates on final purchase price allocation and any material changes to the fair value of assets and liabilities acquired.
• Progress on integration and realization of anticipated synergies, especially as Cactus transitions off the TSA with Baker Hughes.
• Future disclosures on the treatment and potential settlement or buyout of the mezzanine equity held by Baker Hughes Pressure Control Holdings LLC.
• Any impacts on earnings and cash flows from the amortization of the large new intangible assets and the timing of inventory step-up charges flowing through the income statement.
• Further detail on growth in international markets and new product segments enabled by the SPC acquisition.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors are encouraged to review the company’s filings and consult with their financial advisor before making investment decisions. All information herein is based on preliminary, unaudited financials and is subject to change as Cactus, Inc. finalizes its purchase price allocation and integration of SPC.

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