Smith Intl. Takes Over W-H Energy For $3.2 Billion

Smith International said today it has agreed to buy fellow Houston-based oil field services company W-H Energy Services in a cash and stock deal worth about $3.2 billion.
The acquisition would add directional drilling services — the ability to drill at an angle from a central point — to Smith's portfolio of products and engineering, the company said.

The deal is the latest in a trend of oil field services companies teaming up to offer more one-stop shopping to better compete with conglomerates like Halliburton Co., Schlumberger and Baker Hughes.

Other linkups in recent months include the $7.4 billion merger of National Oilwell Varco and Grant Prideco, announced in December, and Grey Wolf's $1.4 billion purchase of Basic Energy Services, announced in April.

Rock said the combination of Smith and W-H would "accelerate W-H's globalization" by giving its assets more exposure in fast-growing international markets, which account for two-thirds of Smith's revenues.
Ken White, W-H's chief executive, said his company has been the subject of takeover rumors for years as it competed with much larger oil field services companies.

Simmons & Co. International called the deal a win-win for both companies in a note to investors today.

And for W-H, Simmons said, the deal comes after its stock has had a "huge multi-year run," up nearly 60 percent this year following significant gains since 2005.

The companies said Smith will pay $93.55 per share of W-H Energy, a 9 percent premium on Monday's closing price of $85.54. Smith would pay $56.10 per share in cash and issue 0.48 of its shares for each W-H Energy share.

Smith is expected to issue about 15.5 million new shares to W-H shareholders, who would own 7 percent of Smith when the deal closes. That is expected to happen in the third quarter of this year subject to investor and regulatory approval.

Rock declined to tell analysts whether the deal contains provisions blocking other companies from bidding more for W-H Services or specify a breakup fee in the event that it falls through. He said those details would be in a regulatory filing.