Baker Hughes Inc., the third-biggest oilfield services provider in the world, bought rival BJ Services Co. an oil shale company, for $5.5 billion today. Bloomberg has more:
The price represents a 16 percent premium to BJ Services’ stock price on Aug. 28 and will leave BJ stockholders owning about 27.5 percent of Baker Hughes’s outstanding shares, Houston-based Baker Hughes said in a statement today. BJ Services shareholders will receive 0.40035 share of Baker Hughes’s stock and a cash payment of $2.69 a share.
BJ Services is the third-largest provider of so-called pressure-pumping services, whereby slurry, often sand and water, is injected into a well to stimulate production. Pressure pumping is used in unconventional gas plays such as shale formations to break up rock. The method is expected to account for about 20 percent of the combined company’s revenue, compared with less than 1 percent for Baker Hughes last year.
The Financial Times adds:
The purchase of BJ Services will significantly boost Houston-based Baker Hughes’ ability to perform pressure pumping services, which are in increasingly high demand around the world as oil fields age and require stimulation to keep producing.
Baker Hughes’ pressure pumping business will jump from less than 1 per cent of its revenue to more than 20 per cent when the deal is completed. That is still less, on a percentage basis, than the amount of revenue larger rivals Schlumberger and Halliburton derive from pressure pumping.
Daily Finance says this is the third biggest mergers & acquisitions deal of the year, behind Pfizer-Wyeth and Merck-Schering Plough.