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Schlumberger to merge with Smith International in $11B deal

September 13, 2010

By MONICA HATCHER
Copyright 2010 Houston Chronicle

Schlumberger, the world’s largest oil field services company, said Sunday it would merge with Houston-based Smith International in an all stock transaction valued at about $11 billion.

Boards of directors for each company unanimously approved the transaction, in which Smith shareholders will get 0.6966 shares of Schlumberger stock in exchange for each share of Smith.

The deal places a $45.84 price on each Smith share, representing a premium of 37.5 percent over Thursday’s closing stock prices, Schlumberger said.

At closing and after new shares are issued, Smith stockholders will own about 12.8 percent of Schlumberger’s outstanding shares of common stock.

With the merger, Houston-based Smith International, which employed more than 3,700 people in the Houston-area around this time last year, will be subsumed by the giant international conglomerate for its expertise in drill bits and drilling fluids

“Smith’s drilling technologies, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide,” Schlumberger CEO Andrew Gould said in a statement.

Schlumberger also is a major Houston-area employer with approximately 5,000 workers.

Closing the deal, which is expected to happen in the second half of 2010, will be contingent upon approval from Smith stockholders as well as customary regulatory approvals, Schlumberger said.

Schlumberger, with principal offices in Paris, Houston and The Hague, is by far the largest supplier of products and services to oil and natural gas customers worldwide. Though business was down sharply last year, it still pulled in more than $22 billion in annual revenue. Its next biggest competitor, Houston and Dubai-based Halliburton, posted less than $15 billion.

After costs associated with integrating the two companies, Schlumberger said it expects $160 million in efficiencies in 2011 from the merger, followed by $320 million the following year. That’s when they also expect the merger to have a positive impact on earnings per share. There was no word Sunday on any potential job cuts.

With the merger, Schlumberger will get full control of M-I SWACO, the market leader in drilling and completion fluids, which is owned 60 percent by Smith and 40 percent by Schlumberger. Since the venture formed more than 10 years ago, there had been rumors of a Schlumberger-Smith merger.

http://www.chron.com/disp/story.mpl/business/6878106.html

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