A merger agreement has been decided upon which was jointly declared by Cameron and Schlumberger Limited. The companies will pull in cash as well as stock transactions in this merger. The board of directors of both companies has provided approval for the merger unanimously. The agreement terms include the shareholders of Cameron to receive 1.716 shares of the other company and, cash payment would be meted out at the rate of $14.44 for every Cameron share that was held by them.
The closing prices of the stocks of both companies were considered as on August 25th, 2015 and hence every Cameron share is valued at $66.36 which represents a premium of 37% on the weighted average price of each share as well as a 56% premium on the closing stock price of the company. The shareholders of Cameron will end up owning ten percent of the outstanding shares of Schlumberger.
As the merger takes place pretax synergies in amounts of 300 and 600 million dollars will be realized by Schlumberger in the first and the subsequent year respectively. The combination will also see accruals in the form of earnings per share by the time the first year has ended. The transaction will also include two technology portfolio inclusions which will add to pore to pipeline products as well as services. The combined revenues of both companies as of 2014 were 59 billion dollars.
The CEO and Chairman of Schlumberger, Paal Kibsgaard stated that the agreement will surely open up new opportunities for the company. It has been discussed at the investor conference in 214 how the E&P industry needs to change in order to deliver better performance when commodity prices are of a limited range. The oil prices have moved to lower levels and hence, oilfield services need to integrate and use innovative technology in order to increase efficiency and be able to outperform others in the market.
The technical change that is expected will come about when well and reservoir technology expertise of Schlumberger is combined with leadership qualities of Cameron in the sphere of flow control, drilling, processing and surface technologies. Production and drilling systems will see improvement in performance as instrumentation; automation and software enable knowledge of deep reservoirs across the world.
The merger should help bring about gains in efficiency as operating costs are lowered as well as supply chains streamlined and manufacturing processes improved upon. The transformation platform of Schlumberger will be leveraged and the talent of the Cameron employees will be harnessed as a distinct product group within the parent company.