Schlumberger (SLB) Announces Acquisition Of Smith (SII) In A $11 Billion Deal
February 22, 2010 2:44 PM
Schlumberger (NYSE: SLB) announced acquisition plans for Smith International, Inc. (NYSE: SII) worth $11 billion in an all-stock deal, as reported by the Wall Street Journal. It is the biggest deal to be announced till now, this year, in the U.S. It will also strengthen Schlumberger’s position as the world’s biggest oilfield-services company.
Post the deal, Schlumberger will have double the revenue of its nearest rival, Halliburton Co. (NYSE: HAL). As per the terms of the deal, Smith shareholders will receive 0.6966 Schlumberger share for each Smith share they own. This implies a 37.5% premium over Smith’s share price on Thursday, when the deal was first reported.
Schlumberger will also take on Smith’s $1.2 billion debt, additionally. Smith shareholders will end up owning about 12.8% of the combined entity. The deal, subject to shareholder approval, is expected to close in the second half of the year. The $11 billion valuation puts Smith at $44.51 per share (based on Friday’s close).
Goldman Sachs & Co. (NYSE: GS) advised Schlumberger on the deal. UBS Investment Bank (NYSE: UBS) advised Smith. This acquisition will make Schlumberger a major competitor in one of the areas of the oil industry where it did not have significant presence: manufacturing drill bits. Schlumberger will also end up with complete ownership over M-I Swaco, the drilling-fluids business, which the two companies have co-owned since 1999.
Schlumberger Chairman, and CEO Andrew Gould said in a statement Sunday that the merger will result in savings of about $160 million in 2011, and $320 million in 2012.
