It’s a mega merger analysts say will work well for both companies.
A six-year low in oil prices — they are hovering in the $40 per barrel range — has prompted the world’s largest oilfield service company to buy a smaller competitor, one of many such transactions expected in the coming months.
Schlumberger Limited and Cameron International confirmed Aug. 26 that they have agreed to merge in a stock and cash transaction valued about nearly $15 billion. The merger comes on the heels a deal between the Paris-based company’s two biggest competitors, Halliburton and Baker Hughes, a $35 billion transaction still being reviewed by regulators.
Under the terms of the agreement, Cameron (NYSE: CAM) shareholders will receive 0.716 shares of Schlumberger (NYSE: SLB) common stock and a cash payment of $14.44 in exchange for each Cameron share.
Based on the closing stock prices of both companies on August 25, 2015, the agreement places a value of $66.36 per Cameron share, representing a 37 premium to Cameron’s 20-day volume weighted average price of $48.45 per share, and a 56.3 premium to Cameron’s most recent closing stock price of $42.47 per share. Upon closing, Cameron shareholders will own approximately 10 percent of Schlumberger’s outstanding shares of common stock.
The companies did not disclose the extent to which the merger will affect personnel. Schlumberger has 2,160 in the nine-parish Acadiana region and Cameron, which is headquartered in Houston, has 1,038, according to Reference USA.
According to the press release, the transaction combines two complementary technology portfolios into a “pore-to-pipeline” products and services offering to the global oil and gas industry. On a pro forma basis, the combined company had 2014 revenues of $59 billion.
The Wall Street Journal noted that analysts were not completely surprised by the deal, in part because Schlumberger and Cameron are already partners in a joint venture, OneSubsea, which focuses on drilling and managing subsea wells in extremely deep water offshore.
The transaction is subject to Cameron shareholders’ approval, regulatory approvals and other customary closing conditions. It is anticipated that the closing of the transaction will occur in the first quarter of 2016.
The combination of two of the best known names in oilfield services is expected to create an energy technology powerhouse, executives from the two companies emphasized during a conference call about the merger.
“We believe that the next industry technical breakthrough will be achieved through integration of Schlumberger’s reservoir and well technologies with Cameron’s leadership in surface, drilling, processing and flow control technologies,” Paal Kibsgaard, chairman and CEO of Schlumberger said in the press release. “Deep reservoir knowledge further enabled by instrumentation, software and automation will launch a new era of complete drilling and production system performance.”
Schlumberger employs approximately 108,000 people in 85 countries, and Cameron has 24,000 employees and operates in more than 300 locations around the world.