Dnow Inc. (NYSE: DNOW) has reported an 11% year-to-date gain, surpassing the S&P 500’s 5% increase. This momentum follows its announcement of a $1.5 billion all-stock acquisition of MRC Global Inc. (NYSE: MRC), indicated to reshape the energy supply chain. MRC shareholders will receive 0.9489 shares of DNOW for each share held, representing an 8.5% premium to MRC’s recent trading price.
Under the deal, DNOW shareholders will hold approximately 56.5% of the combined entity, with MRC investors owning the remaining 43.5%. The merger creates a new enterprise value near $3 billion. However, challenges persist as WTI crude prices have fallen 5% year-to-date to around $67 per barrel, compounded by increasing supply concerns from OPEC+ and potential U.S. tariffs up to 50% as warned by Treasury Secretary Scott Bessent.
Despite strong market performance, DNOW faces significant operational risks with lower profit margins than industry averages. The company reports a poor operating margin of 5.0%, compared to the S&P 500’s 14.9%, along with a $41 million debt against a $1.5 billion market cap, suggesting a stable financial position with a debt-to-equity ratio of only 2.6%.
