Houston-based Weatherford International Inc. said Tuesday it has agreed to acquire a 48% interest in Universal Compression Inc., Houston, through a merger of Weatherford Global Compression Services with Universal. The resulting company will retain the name Universal Compression Services. Weatherford said the company will be the world's second largest compression services company, with 1.8 million hp of compression capacity.
Weatherford will first buy out its 36% minority partner in Weatherford Global Compression, GE Capital, for $206.5 million.
Under the terms of the agreement, Universal will then issue Weatherford 13.75 million shares of Universal common stock, representing 48% of the total outstanding shares of the new company, in exchange for most of the assets and associated liabilities of its Weatherford Global Compression Services division. Weatherford will retain approximately $40 million of Weatherford Global's assets.
The transaction is subject to shareholder and regulatory approval, but is expected to close in the first quarter of 2001.
Stephen Snider, Universal president and CEO, said, " We expect substantial consolidation synergies in North America where our businesses are very similar. In addition, our international footprint will be expanded considerably. We are very excited about the potential for the new Universal."
Weatherford expects a pre-tax charge for the transaction of approximately $20 million relating to transaction costs and severance expenses. The company also warned it may incur a non-cash charge because the market price of the Universal stock at time of closing is less than its approximate $490 million book value, and there may also be a non-cash charge for the establishment of deferred taxes because Weatherford is no longer consolidating its compression operations.