Schlumberger Ltd and Smith International, Inc. have jointly announced today that their Boards of Directors have unanimously approved a definitive merger agreement in which the companies would combine in a stock for stock transaction.
Under the terms of the agreement, Smith shareholders will receive 0.6966 shares of Schlumberger in exchange for each Smith share. Based upon the undisturbed closing stock prices for both companies on 18 February 2010, the agreement places a value of US$ 45.84 per Smith share, representing a 37.5% premium. Upon closing, and reflecting the issuance of new Schlumberger shares, Smith stockholders collectively will own approximately 12.8% of Schlumberger’s outstanding shares of common stock.
Schlumberger expects to realise incremental pretax synergies, after integration costs, of approximately US$ 160 million in 2011 and approximately US$ 320 million in 2012. Schlumberger expects the combination to be accretive to earnings per share in 2012.
Optimising drilling systems
Andrew Gould, Chairman and Chief Executive Officer of Schlumberger remarked, ‘At our investor event in September 2008, we highlighted that increased levels of drilling are required to sustain and increase world oil and gas production. Increasingly, those wells are being drilled in more challenging environments and in new resource plays, with longer and more complex profiles.
We firmly believe that the next breakthrough will be through engineered drilling systems that optimise all the components of the drill string, allowing our customers to drill more economically in demanding conditions. This step change in drilling performance and well productivity must come from combining measurement and steering capabilities with the engineering and design of the complete bottomhole assembly and its various components, including the drilling fluids and drill bit, with the hydraulic and mechanical environment in which they operate.
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. We believe this transaction brings significant benefits to the customers and shareholders of both companies, and we look forward to welcoming Smith employees to Schlumberger.’
Sealing the deal
The transaction is subject to various conditions including Smith stockholder approval and customary regulatory approvals, as well as the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. It is anticipated that the closing of the transaction will occur in the latter half of 2010.