Houston-based National Oilwell Inc. announced plans to acquire Houston-based Varco International Inc. in a stock deal valued at about $2.22 billion. The deal will combine two companies that provide products and services for oil and natural gas drilling.
Terms of the agreement call for Varco stockholders to receive 0.8363 of a National Oilwell share for each Varco share. Based on National Oilwell’s Wednesday closing price of $30.85 on the New York Stock Exchange, the transaction values each Varco share at $25.80, a 9.2% premium to Varco’s Wednesday closing price of $23.62.
National Oilwell President and Chief Executive Pete Miller will serve in the same capacity of the combined company. John Lauletta, Varco’s chairman and CEO, will serve as chairman of the combined company. Varco’s president and chief operating officer, Joe Winkler, will serve as the operating chief. Each company will be equally represented on the board and, after closing of the deal, National Oilwell will change its name to National Oilwell Varco Inc.
National Oilwell expects that the transaction will add to earnings and cash flow per share in 2005. National Oilwell expects about $40 million to $50 million in pretax cost cuts as a result of production facility consolidation, expense reductions in sales and marketing and corporate overhead cuts that should be achieved by the end of 2005.