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Cactus International Acquisition
 3 Months Ended
Mar. 31, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Cactus International Acquisition Cactus International Acquisition
As noted above, on June 2, 2025, Cactus Companies, a subsidiary of Cactus, Inc., entered into a Framework Agreement (the “Framework Agreement”) with Baker Hughes Holdings and Baker Hughes Pressure Control LLC, each of which at such time was an indirect subsidiary of Baker Hughes Company, pursuant to which the Company agreed to acquire Baker Hughes Company’s surface pressure control business.

Prior to the Closing Date, Baker Hughes Holdings effected certain restructuring transactions on the terms and subject to the conditions set forth in the Framework Agreement (the “Restructuring Transactions”), as a result the Joint Venture and certain of its subsidiaries came to own the Business Assets and Business Liabilities (each as defined in the Framework Agreement). As part of the Restructuring Transactions, the Joint Venture converted from a Texas limited partnership to a Delaware limited liability company.

On the Closing Date, Baker Hughes Holdings and certain of its affiliates sold 65% of the Membership Interests to the Cactus Member, a subsidiary of Cactus Companies, for a cash purchase price of $344.5 million (on a debt-free, and, except as noted below, cash-free basis), subject to certain working capital, cash, debt, capital expenditure and other customary adjustments after the Closing Date (the “Purchase Price”). The Joint Venture was to retain minimum cash of $70.0 million (the “Minimum Cash Amount”). In order to compensate Baker Hughes Holdings for the Minimum Cash Amount, Cactus Companies (i) paid Baker Hughes Holdings 65% of the Minimum Cash Amount, or $45.5 million, on the Closing Date, and (ii) will pay Baker Hughes Holdings 35% of the Minimum Cash Amount, or $24.5 million, as follows: $10.0 million, subject to contractual adjustments on the first anniversary of the Closing Date, and $14.5 million at such time as Baker Hughes Company ceases to be a member, directly or indirectly, of the Joint Venture.

The acquisition was completed to expand the Company’s surface pressure control operational capabilities and broaden its geographic footprint. The acquired business complements the Company’s existing pressure control offerings through additional product capabilities, manufacturing capacity, geographic markets and customer relationships.

The acquisition is being accounted for using the acquisition method of accounting, with Cactus being treated as the accounting acquirer. Under the acquisition method of accounting, the assets and liabilities were recorded at their respective fair values as of the date of the completion of the acquisition. The transaction was treated as a purchase of partnership units for United States federal income tax purposes. In connection with the acquisition, we incurred approximately $5.8 million of transaction costs for the three months ended March 31, 2026 required to effect the transaction and incurred an additional $0.5 million in costs related to the reporting of and accounting for the transaction. These fees primarily related to legal, accounting and consulting fees and are included in selling, general and administrative (“SG&A”) expenses in the statements of income.
Purchase Price Consideration
The estimated purchase price consideration is $362.0 million and is summarized as follows:
Purchase Price Consideration
Initial cash payment (1)(2)
$344,500 
Minimum cash amount at closing
45,500 
Working capital and other
(34,235)
Deferred Payment (3)
6,266 
Fair value of consideration$362,031 
(1) The cash consideration was funded utilizing cash on hand.
(2) The total cash consideration transferred is subject to potential working capital and capital expenditure adjustments.
(3) Represents the estimated fair value of our deferred consideration payment of $10.0 million, subject to contractual adjustments, discounted at present value and payable to the Seller on the first anniversary of the Transaction Date.
Preliminary Purchase Price Allocation
The following table summarizes the preliminary allocation of the purchase price to the identifiable assets acquired and liabilities assumed based on their estimated fair values as the acquisition date:
Cash and cash equivalents$70,000 
Receivables241,530 
Inventories137,053 
Prepaid expenses and other current assets2,234 
Property and equipment55,450 
Operating lease right-of-use assets16,188 
Identifiable intangible assets228,800 
Other noncurrent assets17,090 
Total assets acquired (A)
768,345 
Accounts payable151,979 
Accrued expenses and other current liabilities43,884 
Finance lease obligations78 
Operating lease liabilities17,119 
Deferred tax liabilities38,559 
Other non-current liabilities
33,698 
Total liabilities assumed (B)
285,317 
Net identifiable assets acquired (C) = (A)-(B)
$483,028 
Fair value of the mezzanine classified non-controlling interest (D)
146,738 
Fair value of the other non-controlling interest (E)
19,565 
Goodwill (F)
45,306 
Total consideration to be transferred (G) = (C) - (D) - (E) + (F)
$362,031 

Assets acquired and liabilities assumed in connection with the acquisition were recorded at their estimated fair values. Estimated fair values were determined by management, based in part on an independent valuation performed by third-party valuation specialists. The valuation methods used to determine the estimated fair value of intangible assets included the excess earnings approach for customer relationships, which values the relationships on a standalone basis by estimating the excess earnings that are driven by owning the customer relationship via a framework that deducts direct and indirect costs. Backlog is a representation of what a buyer would pay to assume the open customer orders on hand. Several significant assumptions and estimates were involved in the application of these valuation methods, including revenues from equipment sales and services, costs to produce, tax rates, capital spending, discount rates, attrition rates and working capital changes. The cash flow forecasts are based solely on facts and circumstances that existed or were reasonably knowable as of the acquisition date. Identifiable intangible assets with finite lives are subject to amortization over their estimated useful lives.
The fair values determined for accounts receivable, accounts payable and most other current assets and liabilities, other than inventory, were approximately equivalent to the carrying value due to their short-term nature. The gross contractual amounts receivable acquired totaled $242.9 million, of which management estimates $2.6 million will be uncollectible. Acquired inventories are comprised of raw materials, work-in-progress and finished goods. The preliminary fair value of finished goods was calculated as the estimated selling price, less costs of the selling effort and a reasonable profit allowance relating to the selling effort. The preliminary fair value of work-in-progress was calculated as the estimated selling price, less costs to complete, less costs of the selling effort and a reasonable profit allowance on completion and selling costs. The preliminary fair value of raw materials was determined based on replacement cost which approximates historical carrying value. The preliminary fair value of identifiable fixed assets was calculated using a combination of valuation approaches, but primarily consisted of the cost approach which adjusts estimates of replacement cost for the age, condition and utility of the associated assets. The acquisition includes a deferred payment component and a put option and call option for the remaining equity interest. The net put/call was valued at $146.7 million using a Monte Carlo simulation in a risk-neutral framework. The fair value of the remaining noncontrolling interest of 35% after the acquisition was determined using the implied enterprise value based on the purchase price. Due to the redeemable nature of the arrangement, both the fair value of the option and the redeemable NCI are classified within Mezzanine Equity.

Other noncontrolling interests acquired were valued at $19.6 million using the noncontrolling interest of the acquired subsidiary’s fair value measured using discounted cash flows under the income approach.

Goodwill is calculated as the excess of the purchase price over the estimated fair value of net assets acquired and liabilities assumed, and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Among the factors that contributed to a purchase price in excess of the estimated fair value of the net tangible and intangible assets acquired were the acquisition of an assembled workforce, market expansion opportunities and other benefits that we believe will result from the combined operations. Goodwill was further increased by the deferred tax liability associated with the fair market value in excess of the tax basis acquired. The goodwill associated with this transaction has been allocated to our Pressure Control segment.

Due to the timing of the completion of the acquisition, the purchase price and related allocation are preliminary and could be revised as a result of adjustments made to the purchase price, additional information obtained regarding assets acquired and liabilities assumed, and revisions of preliminary estimates of fair values including, but not limited to, certain tangible assets acquired and liabilities assumed, contractual relationships, intangible assets, certain working capital items, deferred income taxes and residual goodwill. These changes to the purchase price allocation could be significant. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date.

From the Closing Date through March 31, 2026, Cactus International contributed revenue of $126.9 million and a net loss of $0.5 million to the Company's unaudited condensed consolidated results of operations.

Intangible assets acquired consist of customer relationships, developed technologies and backlog. The Company amortizes finite-lived intangible assets on a straight-line basis over their respective useful lives. The following table presents the details of identifiable intangible assets acquired and the respective estimated useful lives:

(in thousands)
Estimated useful life
Amount
Customer relationships
15.0 years
$169,670 
Developed technology
10.0 years
40,360 
Backlog
1.0 year
18,770 
Total identifiable intangible assets
$228,800 
Pro forma financial information

The pro forma financial information below represents the combined results of operations for the three months ended March 31, 2025, as if the acquisition had occurred as of January 1, 2025. There is no pro forma information included for the three months ended March 31, 2026, because the Company’s actual financial results for such period fully reflect the acquisition. The unaudited pro forma combined financial information includes, where applicable, adjustments for additional amortization expense related to the fair value step-up of intangible assets, additional inventory fair value step-up expense, additional depreciation expense associated with adjusting property and equipment to fair value, changes to align accounting policies and associated tax-related impacts of adjustments. These pro forma adjustments are based on available information as of the date hereof and upon assumptions that we believe are reasonable to reflect the impact of the acquisition on our historical financial information on a supplemental pro forma basis. The unaudited pro forma financial information is presented for informational purposes only and is neither indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the period presented nor indicative of future operating results.
Three Months Ended
March 31
2025
Revenues$422,572 
Net Income attributable to Cactus, Inc.41,767 

Subsequent measurement of Mezzanine Equity

Although the Mezzanine Equity is not currently redeemable, redemption is considered probable; therefore, the Company elected Method 2 under ASC 480 and remeasures the Mezzanine Equity to its estimated redemption value each reporting period, with subsequent changes reflected directly in retained earnings. The redemption price is determined in accordance with the terms of the agreement and is calculated by applying a specified multiple to EBITDA. For additional information, see “Note 14 – Earnings per Share”.