DNOW Inc

Item 1A. Risk Factors

As of the date of this filing, the Company and its operations continue to be subject to the risk factors previously disclosed in Part 1, Item 1A Risk Factors in our 2024 Annual Report on Form 10-K and the following additional risk factors.

Risks Relating to the Merger

We may not be able to successfully integrate the business of MRC Global into our business or realize the anticipated benefits of the mergers.

The mergers involve the combination of two companies that currently operate as independent public companies. The combination of two independent businesses is complex, costly and time consuming, and we will be required to continue to devote significant management attention and resources to integrating the business practices and operations of MRC Global into us. Potential difficulties that we may encounter as part of the integration process include the following:

the inability to successfully combine our business and MRC Global in a manner that permits the combined company to achieve, on a timely basis, or at all, the enhanced revenue opportunities and cost savings and other benefits anticipated to result from the mergers;

complexities associated with managing the combined businesses, including difficulty addressing possible differences in operational philosophies and the challenge of integrating complex systems, technology, networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies;

the assumption of contractual obligations with less favorable or more restrictive terms; and

potential unknown liabilities and unforeseen increased expenses associated with the mergers.

Any of these issues could adversely affect our ability to maintain relationships with customers, suppliers, employees and other constituencies, our ability to achieve the anticipated benefits of the mergers, our earnings or our business and financial results following the mergers.

The financial forecasts disclosed in connection with the announcement of the mergers are based on various assumptions that may not be realized.

The financial estimates disclosed in connection with the announcement of the mergers were based on assumptions of, and information available to, our management when prepared, and these estimates and assumptions are subject to uncertainties, many of which are beyond our control and may not be realized. Many factors will be important in determining the our future results following the mergers. As a result of these contingencies, actual future results may vary materially from our estimates. In view of these uncertainties, these financial estimates should not be viewed as a representation that the forecasted results will necessarily reflect actual future results.

Our financial estimates were not prepared with a view toward public disclosure, and such financial estimates were not prepared with a view toward compliance with published guidelines of any regulatory or professional body. Further, any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation, other than as required by applicable law, to update the financial estimates to reflect events or circumstances after the date those financial estimates were prepared or to reflect the occurrence of anticipated or unanticipated events or circumstances.

The failure to successfully combine the businesses of DNOW and MRC Global may adversely affect our business.

The success of the mergers will depend, in part, on our ability to realize the anticipated benefits from combining our business with MRC Global. To realize these anticipated benefits, our and MRC Globals businesses must be successfully combined. If the combined company is not able to achieve these objectives, the anticipated benefits of the mergers may not be realized fully or at all or may take longer to realize than expected. In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of the mergers, and such integration may not be successful or may take longer than anticipated. It is possible that the integration process could result in the loss of key employees, as well as the disruption of our ongoing businesses or inconsistencies in our standards, controls, procedures and policies. Any or all of those occurrences could affect adversely the combined companys ability to maintain relationships with customers and employees after the mergers or to achieve the anticipated benefits of the mergers. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on us.

Our entry into the merger agreement may adversely affect our business.

Our entry into the merger agreement represents several risks. Among other obligations, the merger agreement subjects us to restrictions on our business activities prior to the closing of the mergers. These restrictions could prevent us from pursuing certain business opportunities that arise prior to the closing and are outside the ordinary course of business.

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The mergers are subject to the satisfaction of a number of other conditions beyond the parties control that may prevent, delay or otherwise materially adversely affect the completion of the mergers. These conditions include, among other things, MRC Global stockholder approval of the merger agreement and the mergers and DNOW stockholder approval of the issuance of DNOW common stock in connection with the mergers. We cWe cannot predict with certainty whether and when any of these conditions will be satisfied. Any delay in completing the mergers could cause the combined company not to realize, or delay the realization, of some or all of the benefits that we expect to achieve from the mergers. Additionally, if the mergers are not completed, our ongoing business may be adversely affected and, without realizing any of the benefits of having completed the mergers, we may experience certain negative effects, including that we may experience negative reaction from the financial markets and business partners and that we may still be required to pay significant costs relating to the mergers, such as accounting, legal and other advisory and printing costs. Upon termination of the merger agreement under certain circumstances, we may be required to reimburse MRC Globals expenses up to $8.5 million or pay MRC Global a termination fee equal to $45.5 million.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger or other business combination agreements. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition. Lawsuits that may be brought against us or our directors could also seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the merger agreement already implemented and to otherwise enjoin the parties from consummating the mergers. Additionally, the defense or settlement of any lawsuits or claim against us or MRC Global that remains unresolved at the time the mergers are completed may be assumed by us and could affect adversely the combined companys business, results of operations, financial condition or cash flows.

Upon termination of the merger agreement under certain circumstances, we may be required to reimburse MRC Globals expenses up to $8.5 million or pay MRC Global a termination fee equal to $45.5 million.