Sunday, February 21, 2010

Schlumberger to buy Smith International - Dan Goldfarb

Schlumberger (SLB) has agreed to purchase Smith International (SII) for $11.3 Billion in an all stock transaction. The transaction is the biggest U.S. merger for this year and is Schlumberger’s biggest acquisition, according to Bloomberg data. It’s also the biggest acquisition of an oilfield-services company since Bloomberg began tracking merger statistics more than a decade ago.

Schlumberger is the world’s largest oilfield services company and Smith International is the biggest drilling fluids provider. They are both direct competitors of National Oilwell Varco (NOV) and the merger will add to Schlumberger's already dominant market share in the oil & well services industry.

I still intend on pitching National Oilwell Varco as a buy, given their strong balance sheet and excellent management team. I feel the current M&A activity in this industry is a good sign for the industry as a whole, and given their strong financial position, NOV is well positioned to take advantage of such activity. The following are links to articles giving more detail on the acquisition:

Other comments are welcomed and encouraged. I would like to get the group's opinion on the issue. My model will be sent out shortly.

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