Cactus, Inc. Material Event - What Happened

Hey there! Let's break down some important news about Cactus, Inc. in a way that makes sense, without all the confusing finance talk. Think of this as me explaining it to you over coffee.

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1. What happened?

Okay, so Cactus, Inc. has completed a major acquisition! They've bought a 65% stake in Baker Hughes Company's surface pressure control business. This business, now called Baker Hughes Pressure Control LLC (it used to be a limited partnership), focuses on equipment and services that help manage pressure during oil and gas drilling.

2. When did it happen?

The deal officially closed on January 1, 2026. However, Cactus first announced their intention to buy this business back on June 2, 2025, when they signed the initial agreement.

3. Why did it happen?

Cactus is clearly looking to expand its footprint in the surface pressure control market. By acquiring a majority stake in Baker Hughes's established business, Cactus gets to grow its operations and offer more services. Before the deal closed, Baker Hughes even reorganized this specific business to make it easier for Cactus to sell.

4. Why does this matter?

This is a big move for Cactus! They've spent a significant amount of cash – $344.5 million, plus some additional payments for cash held by the acquired business – to become a major player in the surface pressure control sector. It means they're growing their business substantially. It also creates a joint venture, meaning Cactus now owns 65% and Baker Hughes still owns 35% of this business. This partnership structure, and the future option for Cactus to potentially buy the remaining 35%, is a key detail.

5. Who is affected?

• Cactus, Inc. itself: They've significantly expanded their business, spent a lot of cash, and now have a new joint venture to manage. Their strategic direction is clearly focused on growth in surface pressure control.
• Their Employees: Employees of the acquired Baker Hughes surface pressure control business are now part of this new joint venture, with Cactus as the majority owner. This could mean new opportunities or changes in how things are done.
• Their Customers: Customers of both Cactus and the acquired Baker Hughes business might see an expanded range of products and services, or a more integrated offering in the future.
• Their Investors (that's you!): This is a substantial investment. While it could lead to future growth and profits, it also means a large cash outlay. The joint venture structure and the "Exit Option" (where Cactus might buy the remaining 35% later) are important factors for long-term valuation.
• Their Competitors: Cactus just got bigger in the surface pressure control market, making them a more formidable competitor.

6. What happens next?

Cactus will now focus on integrating this new 65% stake into its operations and working with Baker Hughes as a partner in the joint venture. A key future event to watch is the "Exit Option." Starting two years from the closing date (January 1, 2028), either Baker Hughes can decide to sell its remaining 35% stake, or Cactus can decide to buy it. The price for that future transaction will be based on the business's performance at that time, with a maximum valuation of $660 million and a minimum of $530 million if Cactus initiates the purchase.

7. What should investors/traders know?

Alright, for those of you watching the stock:

• Expect some movement: A deal of this size often causes stock price fluctuations as the market digests the news.
• Significant cash outlay: Cactus funded the $344.5 million purchase price using cash they already had. This is a large sum, so it's worth noting how it impacts their cash reserves.
• Joint Venture Structure: Remember, Cactus owns 65%, and Baker Hughes still owns 35%. This means they'll be operating this business together for now.
• The "Exit Option" is key: The future of the remaining 35% stake is already laid out. This provides a roadmap for a potential full acquisition by Cactus down the line, and the terms (multiples, min/max valuation) are already defined. Keep an eye on the business's performance, as that will influence the future purchase price if the option is exercised.
• Consider your own strategy: Does this expansion and joint venture structure align with your investment goals for Cactus?

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That's the gist of this big move! Cactus is growing, but it's also a complex deal with future steps to watch. Keep an eye on how this new joint venture performs and what happens with that "Exit Option" in a couple of years.