On Friday, Schlumberger Ltd. (NYSE: SLB) closed its merger with Smith International after Smith shareholders approved the transaction on August 24.
The previously announced merger calls for each Smith stockholder to receive 0.6966 shares of Schlumberger common stock in exchange for each Smith share. Schlumberger has issued approximately 176 million shares pursuant to the merger, representing a transaction value of approximately $11 billion. Former Smith stockholders own approximately 12.9% of Schlumberger's outstanding shares of common stock.
The merger widens Schlumberger's lead as the world's largest oilfield services company based on revenue and market capitalization.
Zacks Equity Research calls the merger "a good strategic fit" because the companies not only covered many of the same geographical regions, but showed the ability to collaborate in the joint venture M-I SWACO (owned 60% by Smith International and 40% by Schlumberger before the merger), a provider of drilling and completion fluid as well as engineering and technical services to the oil and gas industry.
According to Zacks, Schlumberger expects to realize pre-tax savings of about $160 million in 2011 and $320 million in 2012, after subtracting the cost of absorbing Smith’s operations, positively impacting Schlumberger’s bottom line.
Sources: Schlumberger, Zacks Equity Research