EUR 442.45 For Business Accounts Only

Digging for Strategic Alternatives Uncovers Hidden Value in Spinoff

The separation of KLX, Inc.’s (KLXI) Oilfield Services segment KLX Energy Services Holdings, Inc. (KLXE) is actually the precursor to a larger transaction, namely Boeing’s (BA) $4.2bn acquisition of KLXI’s Aerospace Solutions Group. The Spinoff and the merger are part of the strategic alternatives that the company explored to maximize shareholder value and are in-line with the announcement made in December 2017.

Post-Spin, KLXI will only consist of the Aerospace Solutions business that will be acquired by Boeing through its subsidiary Aviall, which is part of Boeing Global Services. We believe the transaction is a win-win for KLXI shareholders as they will receive shares of the Spinoff KLXE and $63 per share in cash consideration to the proposed merger. On a combined basis (including the value of KLXE), this leads to a 17% premium over the closing sale price of KLXI on December 22, 2017, the last trading day prior to the Company's public announcement of its strategic alternatives review process. From Boeing’s perspective, the acquisition adds to the company’s ability to grow its services segment and bring in-house supply chain capabilities that will help the aerospace giant realise cost savings over the next couple of years. As per the terms of the merger, KLXI will cease to exist and its shares will be delisted when the merger closes by the end of September.

The KLX Energy Services (KLXE) business is cyclical and highly dependent on the overall macro environment surrounding the Oil & Gas (O&G) sector. The recent recovery in the space has benefited the business and KLXE has been able to increase both revenues and margins significantly. The company is in the Oilfield services business and is a leading provider of completion, intervention and production services and products to major onshore O&G producing regions in the US

KLXE was formed from the combination and integration of seven private oilfield service companies acquired between 2013 and 2014. KLXI was later Spun off from B/E Aerospace (BEAV) in December 2014. We believe that given the niche market in which it operates, the company’s differentiated service offerings and its debt-free balance sheet, KLXE is a potential acquisition target post-Spin. We are positive on the company’s experienced management team led by Mr. Amin Khoury, who is currently Chairman & CEO of KLXI. Mr. Khoury has experience in building successful companies from the ground up and maximizing shareholder return through strategic restructuring. As co-founder of BEAV, he was instrumental in the company’s Spinoff of KLXI in 2014 as well as selling BEAV to Rockwell Collins (COL) in 2017 for roughly $8.5bn, which was at a +17% premium.