Schlumberger Ltd will buy oilfield equipment maker Cameron International Corp in a deal valued at $14.8 billion to streamline supply chains and offer cost-effective services to oil and gas customers who have slashed budgets.
The deal is the latest example of energy companies joining forces to help them cope with slumping oil prices, down 60 per cent since June last year and hitting new lows each day.
Schlumberger will be able to bundle its services, which range from surveying a site to drilling wells, with Cameron's products such as pressure valves and blowout preventers, one of which was used in BP's Macondo well that exploded in 2010.
The two companies already have a joint venture since November 2012 aimed at deep water drilling services.
"The deal should allow a more complete solution to customers and should allow SLB to grow market share," said BMO Capital Markets analyst Daniel Boyd. "Smaller companies offering discrete products and services will likely be at a disadvantage going forward."
Schlumberger said the combined company would have had pro-forma revenue of $59 billion in 2014. That is 20 per cent more than Schlumberger's revenue for 2014 and compares with $57.42 billion earned by the combine of Halliburton Co and Baker Hughes Inc, Schlumberger's closest rivals.
Halliburton and Baker Hughes agreed in November to merge, but the deal is yet to close as US antitrust enforcers believe the $35 billion merger will lead to higher prices and less innovation, according to a Reuters source.
However, Schlumberger said it expects no antitrust hurdles and has no plans to divest any part of Cameron's portfolio to get regulatory clearance.
"With SLB-CAM, there is not much in the way of overlapping businesses ... we do not envision an overly difficult antitrust review," Oppenheimer analyst James Schumm said.
Cameron's shares were up about 41 per cent at $60, below Schlumberger's $66.36 per share cash-and-stock offer, in midday trading on Wednesday. Schlumberger's shares fell as much as 7.5 per cent to $68.01, their lowest in two-and-a-half years.
Macondo connection
The Macondo well explosion in April 2010 killed 11 workers and spilled gallons of oil into the US Gulf of Mexico.
Investigators found Cameron's blowout preventer had battery and wiring troubles that hindered the proper functioning of the devices' blind shear rams, which are designed to slice through drilling pipes and cap a well in an emergency.
Cameron agreed to a $250 million settlement with BP PLC to help pay for costs associated with the spill.
Schlumberger's offer on Wednesday values Cameron at $12.74 billion, based on the company's diluted shares as of June 30.
Cameron shareholders will get $14.44 in cash and 0.716 of a Schlumberger share for each share held.
Schlumberger said it expects the deal to add to earnings by the end of the first year after the deal closes. The deal is expected to close in the first quarter of 2016.
Goldman Sachs & Co is Schlumberger's financial adviser and Baker Botts LLP and Gibson Dunn & Crutcher LLP are its legal counsel. Cameron's financial adviser is Credit Suisse and Cravath, Swaine & Moore LLP is its legal counsel.
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