National Oilwell Varco Inc. (NOV), which this year has completed six acquisitions worth $2 billion, last week continued its shopping spree with a $2.5 billion cash offer for Texas operator Robbins & Myers (R&M). The deal would mark NOV's biggest single acquisition since 2008, when it paid $7.7 billion to buy Grant Prideco.
Houston-based NOV was ranked the third largest oilfield service company in the world after Schlumberger Ltd. and Halliburton Co. in the PFC Energy 50 annual ranking for 2011 (see NGI, Jan. 24). The rig technology specialist's backlog for capital equipment orders jumped 46% year/year in the second quarter (see NGI, July 30).
NOV CEO Pete Miller said during the quarterly earnings conference call late last month the company was expanding "organically as well as through acquisitions." CFO Clay Williams also told analysts at the time that NOV was in a "sweet spot" for mergers and acquisitions (M&A) and the company planned to continue to pursue "attractive" targets.
R&M, which is headquartered outside of Houston in Willis, has 3,400 employees and operates in 15 countries as an oilfield services provider to the offshore and onshore industry. The Energy Services Group provides down-hole pumps and systems, power sections, pipeline closures, wellhead products, tubing wear products and well control solutions. The Process and Flow Control Group manufactures and markets glass-lined reactor systems, thermal fluid systems, engineered fluoropolymer products, progressing cavity industrial pumps, grinders and mixing equipment and systems.
"Robbins & Myers has many complementary products with those National Oilwell Varco currently offers the industry," said Miller. "I am particularly enthusiastic about the prospect of incorporating their downhole tools, pumps and valves" into NOV. "We feel that our combined manufacturing infrastructure and portfolios of technology will further advance our presence in the oil and gas markets we serve."
Under the agreement, R&M shareholders would receive $60/share in cash in exchange for each of the 42.4 million shares outstanding. Robbins closed Wednesday trading at about $46.80/share. The company's largest shareholder, M.H.M. & Co. Ltd, which owns about 10% of the outstanding common shares, also agreed to vote in favor of the transaction. Both companies' boards of directors have unanimously approved the transaction, which is expected to be completed by the end of the year.
According to Securities and Exchange Commission filings, NOV has spent close to $2 billion for total M&A spending since the start of the year. In early February NOV agreed to pay $673 million for NKT Flexibles, a joint venture oilfield services company formed by Denmark's NKT Holdings and Norway's Subsea 7. Two months later NOV agreed to an $800 million deal to buy Schlumberger's Wilson oilfield equipment distribution business. A $240 million deal to buy Canadian equipment manufacturer CE Franklin was announced in May. NOV this year also has purchased Canada's Enerflow Industries and Russia's OOO Interval, both for undisclosed amounts.
R&M CEO Pete Wallace said the merger with NOV would allow the company "to join forces with an industry leader that will enable its business segments to fully capitalize on their respective strategies, enhance leadership positions in niche applications and execute growth plans at a faster pace.
"We have worked hard to create a focused business with reduced complexity and a culture of continuous improvement, all based on improving customer productivity and profitability. This is the right time for this transaction, and I believe National Oilwell Varco is the right partner to take us to the next level of performance."
Citigroup Global Markets acted as R&M's lead financial adviser, while Thompson Hine LLP acted as legal adviser. Fulbright & Jaworski LLP acted as NOV's legal adviser.
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