Content area
Full text
The Deal: Schlumberger Ltd. has agreed to acquire Camco International for stock worth $2.97 million, plus the assumption of $160 million in debt. Schlumberger will exchange 1.18 shares of its stock for each of Camco's 38 million shares outstanding, valuing Camco at $78.175/share. Schlumberger expects the purchase to add to earnings in 1999, but they won't estimate by how much. Since there is little overlap in the two companies' businesses, cost savings will be limited and job cuts will be quite minimal. On the news, Camco rose $12.4766, or 20%, to $74.7266/share, while Schlumberger fell $3.6875, or 5.3%, to $66.25/share. Discussion: The deal will allow Schlumberger to fill a void in its oil-services offerings, but at a high price. It values Camco at a premium 26% above its closing price and this has taken some investors and analysts by surprise. In the recent months, as oil prices have fallen to $12/barrel from $20/barrel, so have Camco's shares fallen from their 52-week high of $82.50/share. However, Schlumberger is betting that today's oil prices will not remain so low.