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Schlumberger pays $14.8bn for Cameron

The oilfield service companies will merge as the transaction is completed in the first quarter of 2016

Two oilfield service companies have agreed to merge, as the world’s biggest, Schlumberger, is buying Cameron for $14.8bn in cash and shares.

Schlumberger’s chief executive Paal Kibsgaard said 26 August that the agreement “opened new and broader opportunities for Schlumberger… With oil prices now at lower levels, oilfield services companies that deliver innovative technology and greater integration while improving efficiency, which our customers increasingly demand, will outperform the market.”

Oilfield service companies are struggling for survival as the falling oil price makes projects less and less attractive. Their customers have forced prices down by 30% in some cases. Last year, the second and largest such companies Halliburton and Baker Hughes agreed to a defensive merger which they hope will be completed in December.

Schlumberger expects to realize pretax synergies of $300m and $600m in the first and second year after the deal is done, respectively.

Under the terms of the agreement, Cameron shareholders will receive 0.716 shares of Schlumberger 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 25 August 2015, the agreement places a value of $66.36/Cameron share, representing a 37.0% premium to Cameron's 20-day volume weighted average price of $48.45/share, and a 56.3% premium to Cameron's most recent closing stock price of $42.47/share.

Initially, the gain will come from lower costs, streamlined supply chains and better manufacturing processes. Schlumberger also expects the combination to be accretive to earnings/share by the end of the first year after closing.

Kibsgaard said the said the new company’s deep reservoir knowledge further enabled by instrumentation, software and automation, would “launch a new era of complete drilling and production system performance.”

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.

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