HOUSTON - MRC Global Inc. (NYSE: NYSE:MRC), a global distributor of pipe, valves, and fittings, has announced an agreement to repurchase all of its outstanding 6.50% Series A Convertible Perpetual Preferred Stock from Mario Investments, LLC. The transaction, contingent on the successful completion of a term loan financing, involves a payment of approximately $361 million, which is 99.5% of the liquidation preference of the preferred stock, plus accrued dividends.
To fund this repurchase, MRC Global plans to secure a new $350 million senior secured term loan B, with an expected seven-year term, and may also use existing cash or borrowings from its asset-based lending (ABL) facility. The company is concurrently seeking to amend its ABL facility to extend its maturity until 2029.
Rob Saltiel, President & CEO of MRC Global, stated that the repurchase aims to simplify the company's capital structure and address shareholder concerns about potential equity dilution. He also anticipates that the repurchase will be accretive to cash generation and earnings per share from 2025 onwards, assuming current capital market conditions and anticipated financing terms.
The company's net debt leverage ratio is expected to remain under 2 times following the transaction, based on the past twelve months of adjusted EBITDA. However, the ability to obtain the term loan B, amend the ABL facility, and use the proceeds is subject to market conditions, final agreements with lenders, and board approval.
MRC Global has also provided preliminary financial results for the third quarter of 2024, which are subject to finalization. The preliminary results show revenue of approximately $797 million, adjusted EBITDA of around $48 million, or 6.0% of sales, and cash flow from operations of approximately $95 million. Full third quarter results are scheduled for release on November 5, 2024, followed by a conference call on November 6, 2024.
The company cautions that the forward-looking statements contained in the press release are subject to various risks and uncertainties, and there can be no assurance that the company will achieve the anticipated results. The information provided is based on a press release statement.
In other recent news, MRC Global Inc. has reported significant developments. The company announced the forthcoming retirement of Rance Long, their Senior Vice President of Sales & Marketing, scheduled for May 2025. As MRC Global seeks a suitable successor, Mr. Long will transition to a new role as Senior Vice President – Marketing Strategy, maintaining his current compensation terms until retirement.
The company also disclosed robust performance in its 2024 second-quarter earnings. MRC Global saw a 3% increase in revenue, reaching $832 million, and generated $63 million in operating cash flow. This growth was primarily due to expansion in gas utilities and the Process Tube Fitting sectors.
However, the company anticipates a softer second half due to project delays in the Downstream, Industrial, Energy Transition sector. Despite this, MRC Global remains hopeful for improvement in 2025. The company's international business observed a 15% year-over-year revenue growth, further solidifying its position as a primary strategic supplier to ExxonMobil (NYSE:XOM) in North America. These are recent developments that investors may want to watch.
InvestingPro Insights
MRC Global's recent announcement to repurchase its outstanding preferred stock aligns with several key financial metrics and trends highlighted by InvestingPro. The company's market capitalization stands at $1.08 billion, reflecting its significant presence in the pipe, valves, and fittings distribution industry.
An InvestingPro Tip indicates that MRC Global operates with a moderate level of debt, which is relevant to the company's plan to secure a new $350 million senior secured term loan B to fund the repurchase. This moderate debt level suggests that the company may have the capacity to take on additional financing without overstretching its balance sheet.
Another InvestingPro Tip notes that MRC Global's liquid assets exceed short-term obligations, which could provide flexibility as the company navigates this capital structure change. This liquidity position may have contributed to management's confidence in pursuing the preferred stock repurchase while maintaining a net debt leverage ratio under 2 times.
The company's P/E ratio of 13.25 and adjusted P/E ratio of 12.92 for the last twelve months as of Q2 2024 suggest a relatively modest valuation compared to its earnings. This could indicate that the market has not fully priced in the potential benefits of the simplified capital structure and anticipated accretion to earnings per share from 2025 onwards.
MRC Global's revenue for the last twelve months as of Q2 2024 was $3.29 billion, with a gross profit margin of 20.4%. While the company experienced a revenue decline of 6.66% over this period, its operating income margin of 5.28% demonstrates its ability to maintain profitability in challenging market conditions.
For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights beyond those mentioned here. In fact, there are 8 more InvestingPro Tips available for MRC Global, providing a deeper understanding of the company's financial health and market position.
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