Baker Hughes acquires BJ Services in $5.5 billion transaction
Baker Hughes Inc. approved on Aug. 28 a definitive merger agreement worth $5.5 billion to acquire pressure pumping company BJ Services, in a move to greatly expand Baker Hughes’ pressure pumping business and provide competition to competitors Schlumberger and Halliburton.
The agreement represents a premium to BJ Services stockholders of 16.3% over the closing price of BJ Services stock on Aug. 28. 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.
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.
Although pressure pumping accounted for less than 1% of Baker Hughes' revenues in 2008, it is expected to generate about 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.