Baker Hughes Incorporated and BJ Services Company announced that their Boards of Directors have approved a definitive merger agreement, which represents a transaction value of $5.5 billion for BJ Services based on closing stock prices on August 28, 2009.
The agreement represents a premium to BJ Services stockholders of 16.3% over the closing price of BJ Services stock on August 28, 2009. Under the agreement, BJ Services stockholders will receive 0.40035 shares of Baker Hughes and cash of $2.69 in exchange for each share of BJ Services common stock. Upon closing, and reflecting the issuance of new Baker Hughes shares, BJ Services stockholders collectively will own approximately 27.5% of Baker Hughes outstanding shares.
Source: Baker Hughes Inc.
"The transaction further enhances Baker Hughes position as a top-tier global oilfield services company," said Chad C. Deaton, Baker Hughes chairman, president and chief executive officer. "BJ Services broadens our portfolio by adding products, technologies and talented people that are key to helping our customers unlock value in their reservoirs, particularly in unconventional gas and deepwater fields. It will better position us to drive international growth and to compete for the growing large integrated projects by incorporating pressure pumping into our product offering.
"Our two companies have highly complementary products and services with very little overlap. Baker Hughes has a long record of partnering with BJ Services on major projects. The proposed merger will make Baker Hughes a stronger, more efficient service provider for our customers worldwide, by integrating pressure pumping with Baker Hughes wide range of products and services."
Baker Hughes expects to realize annual cost savings of approximately $75 million in 2010 and $150 million in 2011 as it eliminates redundant costs, consolidates facilities, and further rationalizes field costs. Baker Hughes expects the combination to be accretive to earnings per share in 2011.
The Baker Hughes Board of Directors will be expanded to include two BJ Services Board members.
BJ Services Chairman, President and CEO Bill Stewart said: "We are very pleased to be joining forces with Baker Hughes and believe that this is an attractive combination for all of BJ Services constituencies: customers will benefit from our wider and better-integrated array of services and technologies; our employees will enjoy the advantages and opportunities of being a part of a larger, stronger company; and BJ Services stockholders will have the opportunity to continue to participate in the success of the combined enterprise."
Although pressure pumping accounted for less than 1% of Baker Hughes revenues in 2008, it is expected to generate approximately 20% of the combined company s revenues, providing Baker Hughes with revenues from pressure pumping that approaches its two largest competitors. Pressure pumping has grown in importance as customers have looked for new ways to unlock the full value of their reservoirs. The number of fields requiring pressure pumping services is expected to grow, especially outside of North America, where BJ Services can leverage Baker Hughes extensive international presence as it pursues growth opportunities.
The merger is subject to the approval of both Baker Hughes and BJ Services stockholders as well as other customary approvals. The companies anticipate that the transaction could close as soon as the end of the calendar year. Baker Hughes and BJ Services intend to file a joint proxy statement / prospectus with the Securities and Exchange Commission as soon as possible.
Goldman, Sachs & Co. is acting as Baker Hughes financial advisor, and Baker Hughes legal advisors are Akin Gump Strauss Hauer & Feld LLP, Fulbright & Jaworski L.L.P., Howrey L.L.P., and Morris, Nichols, Arsht & Tunnell LLP. Greenhill & Co. is acting as BJ Services financial advisor and rendered a fairness opinion to the Board of Directors. BofA Merrill Lynch Securities also rendered a separate fairness opinion to the Board of Directors of BJ Services. BJ Services legal advisors are Skadden, Arps, Slate, Meagher & Flom LLP, and Andrews Kurth LLP.