STEP Energy Services to Go Private in $5.50-per-Share Deal with ARC Financial Corp.
STEP Energy Services Ltd. (“STEP” or the “Company”) (TSX: STEP) has officially entered into a definitive arrangement agreement with ARC Financial Corp. (“ARC”) to take the company private in a transaction valued at $5.50 per share in cash. This marks a significant milestone for the Canadian-based energy services firm and follows the non-binding offer initially announced on September 25, 2025.
Under the terms of the agreement, ARC will acquire all issued and outstanding common shares of STEP that it and its affiliated limited partnerships under ARC Energy Fund 6 do not already own or control. The transaction will be executed through a plan of arrangement under the Business Corporations Act (Alberta), with the purchase price of $5.50 per share representing an attractive cash offer for minority shareholders.
The arrangement was unanimously approved by STEP’s Board of Directors (excluding ARC-affiliated members) and remains subject to several key approvals, including majority shareholder consent, a separate vote by minority shareholders, and final court approval. The transaction is expected to close in December 2025, pending the satisfaction of all customary conditions.
Leadership Comments
STEP President and CEO Steve Glanville expressed confidence in the decision, emphasizing both the company’s progress and the fairness of the transaction.
“A year ago, when STEP was exploring similar opportunities, we took pride in what we had built — a best-in-class energy services company rooted in innovation, dedication, and strong relationships with our clients and employees,” said Glanville. “This proposed transaction is the culmination of our efforts to maximize shareholder value. We deeply appreciate the trust and support of our investors over the years.”
Glanville’s remarks highlight the company’s evolution into a major player in the North American energy services market and its continued commitment to stakeholders even as it transitions to private ownership.
Key Highlights of the Transaction
1. Significant Premium to Market Price
The $5.50 per share purchase price represents a 29% premium to STEP’s closing share price on September 24, 2025—the day before ARC’s initial non-binding proposal was made public. This premium reflects the strategic value of STEP’s assets, market position, and long-term potential recognized by ARC.
2. Strong Support from Minority Shareholders
ARC has already secured voting support agreements from minority shareholders representing approximately 32.11% of total outstanding shares and 71.71% of the minority shares. These shareholders have agreed, under certain conditions, to vote in favor of the proposed transaction at STEP’s upcoming special shareholder meeting.
3. All-Cash Consideration
The offer provides a straightforward, all-cash exit for minority shareholders, ensuring liquidity and immediate value realization without exposure to future market volatility.
4. Independent Valuation Confirms Fair Price
STEP commissioned Ernst & Young LLP (EY) to conduct an independent formal valuation of its shares as of October 14, 2025. EY determined that the fair market value range of STEP’s shares lies between $4.80 and $5.70 per share, placing the offer squarely within this range. This reinforces the fairness and competitiveness of ARC’s proposal.
5. Unanimous Support from the Independent Board
All independent directors of STEP’s Board voted unanimously in favor of the transaction. The Board recommends that minority shareholders vote “for” the arrangement resolution at the upcoming special meeting.
6. No Financing Condition
Importantly, the transaction is not subject to any financing contingencies, providing additional certainty of closing for shareholders.
Role of the Special Committee
To ensure fairness and transparency, STEP’s Board formed a Special Committee of independent directors to evaluate ARC’s proposal and explore alternative strategic options. The committee was responsible for overseeing negotiations and obtaining independent financial and legal advice.
After conducting a comprehensive review—including receiving valuation and fairness opinions from EY—the Special Committee concluded that the transaction was in the best interests of STEP and its shareholders. The committee also considered the competitive environment, recent market performance, and long-term growth prospects of the company.
Upon completing its analysis, the Special Committee unanimously recommended that the Board approve the definitive arrangement agreement and endorse the transaction to minority shareholders.
Following this recommendation, STEP’s full Board (excluding ARC-affiliated directors Jeremy Gackle and Jacqueline Forrest, who abstained due to conflict of interest) also unanimously approved the agreement and advised minority shareholders to vote in favor of the arrangement.
Independent Fairness Opinion
In compliance with Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (MI 61-101), the Special Committee retained EY as an independent valuator. EY prepared a formal valuation report and a fairness opinion dated October 17, 2025, confirming that the $5.50 per share cash consideration is fair, from a financial point of view, to minority shareholders.
EY’s valuation process involved a detailed review of STEP’s historical financial results, market conditions, comparable transactions in the energy services sector, and forward-looking projections. The firm’s conclusion provided the Board and Special Committee with a credible and objective basis for endorsing the offer.
Strategic Rationale
The decision to take STEP private reflects both market realities and long-term strategic considerations. As a publicly traded company in a volatile energy sector, STEP faced pressures related to fluctuating commodity prices, regulatory changes, and investor expectations.
By transitioning to private ownership under ARC’s guidance, STEP gains the flexibility to focus on operational efficiency, innovation, and sustainable growth without the constraints of quarterly reporting and short-term market sentiment. ARC’s deep experience in the energy industry and access to significant capital resources are expected to strengthen STEP’s balance sheet and enable strategic investments in technology, digitalization, and environmental performance.
This move is also consistent with ARC’s broader investment strategy, which focuses on partnering with high-performing energy companies to enhance their value through long-term capital deployment and operational expertise.
