Baker Hughes Wisely Forgoes HJs for BJs

by User Submitted

Submitted by user KB

Baker Hughes to Acquire BJ Services in $6.9 Billion Transaction

  • Share price premium of 26.9% over the frothy closing price of BJs stock on August 28, 2009
  • Pressure pumping cost synergies of $75 Million in 2010 and $150 Million in 2011
  • Combination to be immediately accretive to EPS and other easily manipulated metrics

HOUSTON, Aug 31, 2009 — Baker Hughes (NYSE: BHI) and BJ Services (NYSE: BJs) today announced that their respective Boards of Directors have approved a definitive merger agreement, which represents a transaction value of $6.9 billion for BJs based on the closing stock prices on August 28, 2009. This agreement represents a share price premium of 26.9% over the frothy closing price of BJs’ stock on August 28, 2009. Under the agreement, Baker Hughes will be coming to BJs’ stockholders with 0.6969 shares of stock and cash of $0.69 in exchange for each share of BJs common stock. Upon the happy ending of this merger agreement, current Baker Hughes shareholders will own approximately 69% of the blissfully coupled company.

“This transaction further clarifies Baker Hughes’ top-tier position preference for the global exploitation of unconventional and deepwater reservoirs,” said Chad C. Deaton, Baker Hughes Chairman, President and Chief Executive Officer. “BJs’ broads are an excellent addition to our portfolio by adding the services, technologies and talented people that are key to helping releasing the value in our reservoirs. It will better position us to thrust forward for international growth and compete in the cut-throat pressure pumping market. Although in the past I have said I would never pay for BJs, this one was too good to pass up.”

Baker Hughes expects to realize annual pressure pumping cost savings of approximately $75 million in 2010 and $150 million in 2011 as it eliminates dry-hole blind date costs, consolidates booty-call marketing efforts, and further rationalizes playing-the-field costs. Baker Hughes expects the combination to be immediately accretive to earnings per share and other easily manipulated metrics.

BJs Chairman, President and CEO Jill Stewart said: “We are very pleased to be offering our services to Baker Hughes and negotiated hard to maximize the consideration paid for our platform [stripper heels]. Their offer blows all the other offers…out of the water.”

Shareholders of Baker Hughes should note Barclays Capital or J.P. Morgan Securities did NOT act as financial advisor or render a fairness opinion in connection with this transaction, so the risk of overpaying for BJs has been significantly mitigated. In addition, the definitive merger agreement does not appear to contain any major gaping holes because Vinson & Elkins LLP were NOT retained to provide legal counsel or investigate management-controlled limited partnerships.

Conference Call

Baker Hughes and BJs have scheduled a joint conference call. To access the call, please contact the conference call operator at 1.866.637.7128, enter your corporate credit card information, and indicate you are interested in connecting to the BJs discussion. You must be 18 years or older to make this call. Management will provide a brief introduction of the transaction, explain what they are or are not wearing, and then begin the Q&A portion of the call. Please download some materials from the web (Is She Filthy) prior to the call to increase the efficiency of the discussion and ensure your phone on is on mute prior to any heavy breathing.

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