By OGJ editors
HOUSTON, Aug. 31 -- Baker Hughes Inc. and BJ Services Co. have signed a definitive merger agreement valued at $5.5 billion.
Based on the agreement, BJ Services stockholders will receive 0.40035 share of Baker Hughes and $2.69 in cash in exchange for each share of BJ Services common stock. Upon closing, and reflecting the issuance of new Baker Hughes shares, BJ Services stockholders collectively will own about 27.5% of Baker Hughes’ outstanding shares.
Baker Hughes expects to realize annual cost savings of about $75 million in 2010 and $150 million in 2011 as it eliminates redundant costs, consolidates facilities, and further rationalizes field costs, the company said. Baker Hughes expects the combination to be accretive to earnings per share in 2011.
The Baker Hughes board will be expanded to include two BJ Services board members.
Although pressure pumping accounted for less than 1% of Baker Hughes' revenues in 2008, it is expected to generate about 20% of the combined company’s revenues, providing Baker Hughes with revenues from pressure pumping that approaches its two largest competitors.
Pressure pumping has grown in importance as customers have looked for new ways to unlock the full value of their reservoirs, Baker Hughes said. The number of fields requiring pressure pumping services is expected to grow, especially outside of North America, where BJ Services can leverage Baker Hughes' extensive international presence as it pursues growth opportunities.
The merger is subject to the approval of both companies’ stockholders as well as other customary approvals. The companies anticipate that the transaction could close as soon as yearend.
Baker Hughes and BJ Services intend to file a joint proxy statement/prospectus with the US Securities and Exchange Commission as soon as possible.