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Schlumberger Proposes to Acquire Cameron International

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Sep. 10 2015, Published 12:22 p.m. ET

The Schlumberger-Cameron deal

On August 26, 2015, Schlumberger (SLB), the world’s largest OFS (oilfield service) and equipment company by market capitalization, disclosed that it will acquire Cameron International Corporation (CAM), a smaller competitor in the OFS industry. The two companies have announced a definitive agreement under which Schlumberger proposes to acquire Cameron International’s outstanding shares.

Schlumberger expects to incorporate Cameron International through a deal that consists of 78% stock and 22% cash. Schlumberger and Cameron International offer complementary products and services in the downhole (below the ground) and surface (above the ground) drilling market.

The two companies are also currently the first- and sixth-largest OFS companies in the US, respectively, by market capitalization. The merger is expected to give Schlumberger a complementary technology platform, a wider product offering, and several cost optimization benefits.

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Transaction value

Schlumberger’s bid to acquire Cameron International is valued at $14.8 billion. Schlumberger will acquire the smaller company’s shares at a 56.3% premium, based on the closing price on August 25, 2015. Accordingly, Cameron International’s shares will be valued at $66.36 in the transaction, which is expected to be closed in 1Q16. (In Part 6 of this series, we’ll discuss the financial terms of the transaction in greater detail.)

Size and type matter

As of August 28, Schlumberger and Cameron International’s market capitalizations stood at $95.61 billion and $12.39 billion, respectively. After Schlumberger, Halliburton Company (HAL) and National-Oilwell Varco (NOV)—with market capitalizations of $32.83 billion and $15.99 billion, respectively—are the next-to-largest companies in the industry. Schlumberger and Cameron International together make up 32.1% of the VanEck Vectors Oil Services ETF (OIH).

The Baker Hughes (BHI) and Halliburton agreement signed on November 17, 2014, was a deal of size, as the two heavyweights shared similar products and services. By contrast, Schlumberger and Cameron International offer complementary services and products to the upstream energy companies. Also, the scope of their services and offerings varies both geographically and technologically.

Later in this series, we’ll discuss the companies’ varied offerings in greater detail.

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