Schlumberger Ltd and Smith International, Inc. jointly announced 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 February 18, 2010, the agreement places a value of $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 realize incremental pretax synergies�after integration costs�of approximately $160 million in 2011 and approximately $320 million in 2012. Schlumberger expects the combination to be accretive to earnings per share in 2012.
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. Schlumberger is already the leader in the measurement and steering technologies that are necessary to drill these profiles.
We firmly believe, however, that the next breakthrough will be through engineered drilling systems that optimize all the components of the drillstring, 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 bottom-hole assembly and its various components�including the drilling fluids and drillbit�with the hydraulic and mechanical environment in which they operate.
The transaction is subject to various conditions including Smith stockholder approval and customary regulatory approvals, including 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.
Goldman, Sachs & Co. acted as financial advisor and Baker Botts LLP served as legal counsel to Schlumberger. UBS Investment Bank acted as financial advisor and Wachtell, Lipton, Rosen & Katz served as legal counsel to Smith International.