Deal expected to produce $900M in synergies over two years
HOUSTON, Texas—The world’s largest oil field services company just got significantly larger. Houston-based Schlumberger Ltd. and Cameron International Corp. have announced a definitive agreement in which the companies will merge in a stock and cash transaction. The agreement was unanimously approved by both companies’ board of directors.
The deal is valued at US$14.8 billion at current share prices and will see Cameron shareholders receive both shares and cash. Owners will receive 0.716 shares of Schlumberger common stock and a cash payment of $14.44 in exchange for each Cameron share. The deal places a 37 per cent premium on Cameron’s 20-day average price, and a 56 per cent premium on its current price in the wake of the latest market rout. Schlumberger noted the deal would transfer ownership of about 10 per cent of Schlumberger shares to Cameron shareholders.
“This agreement with Cameron opens new and broader opportunities for Schlumberger,” Paal Kibsgaard, chairman and CEO of Schlumberger, said. “At our investor conference in June 2014, we highlighted how the E&P industry must transform to deliver increased performance at a time of range-bound commodity prices. With oil prices now at lower levels, oilfield services companies that deliver innovative technology and greater integration while improving efficiency, which our customers increasingly demand, will outperform the market.”
“We will achieve significant efficiency gains through lowering operating costs, streamlining supply chains, and improving manufacturing processes while leveraging the Schlumberger transformation platform. We look forward to welcoming the talented employees of Cameron and are pleased that they will be joining the Schlumberger team as our fourth product group,” Kibsgaard added.
The company said it expects to realize pretax synergies of approximately $300 million and $600 million in the first and second year respectively. It noted that initially, the synergies will be primarily related to reducing operating costs, streamlining supply chains, and improving manufacturing processes, with a growing component of revenue synergies in the second year and beyond.
“The transaction combines two complementary technology portfolios into a ‘pore-to-pipeline’ products and services offering to the global oil and gas industry,” Schlumberger said.
It also noted on a pro forma basis, the combined company had 2014 revenues of $59 billion.
The transaction is subject to Cameron shareholders’ approval, regulatory approvals and other customary closing conditions. The deal is expected to close in the first quarter of 2016.