Following months of speculation, oilfield giant Schlumberger Ltd., Houston, (NYSE: SLB) agreed to acquire global drilling and completion company Smith International Inc., Houston, (NYSE: SII) for approximately $10.6 billion in a stock-for-stock transaction.
Schlumberger will pay 0.6966 share per Smith share, representing a 37.5% premium based on the closing prices on Feb. 18. The agreement places a value of $45.84 per Smith share. Smith stockholders will own approximately 12.8% of Schlumberger’s outstanding shares.
The two companies are joint-venture partners in drilling fluids company M-I Swaco, in which Smith is a 60% owner.
The Smith oilfield segment is comprised of drilling and completion services, including drill bits, directional drilling services and downhole tools. In addition, Smith’s distribution segment consists of the Wilson distribution operations and a majority-owned interest in CE Franklin Ltd., a publicly-traded Canadian distribution company. Areas of operation include North and Latin America, Europe, Africa, the Middle East and Asia. Smith employs more than 21,000 full-time personnel and operates in more than 80 countries.
Schlumberger expects to realize incremental pretax synergies—after integration costs of approximately $160 million in 2011 and approximately $320 million in 2012. The company expects the combination to be accretive to earnings per share in 2012.
Closing is expected in second-half 2010. Goldman, Sachs & Co. is financial advisor and Baker Botts LLP is legal counsel to Schlumberger. UBS Investment Bank is financial advisor and Wachtell, Lipton, Rosen & Katz is legal counsel to Smith International.
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