Energy service giant Schlumberger and smaller rival Smith International are to join forces in an all-share deal which places a value on Smith of about £7.27billion.
The acquisition by Schlumberger will lead to the combined group having a worldwide workforce of nearly 100,000 people, including a major presence in the north-east, but there is not expected to be much impact on employee numbers.
The companies said yesterday that their directors had unanimously approved an agreement under which the two companies would combine.
The companies said that, based on closing stock prices on February 18, the agreement represented a 37.5% premium to Smith’s price.
They added that Smith stockholders collectively would own about 12.8% of Schlumberger.
After the deal is concluded, likely to be in the second half of this year, Schlumberger will have annual revenue double those of nearest competitor Halliburton at around £18.8billion.
Schlumberger said the deal would be subject to anti-trust review in America and it could not be assumed it would go ahead as envisaged. It added that the companies were complementary with little duplication in either technology or geography.
It said that after weathering a financial storm in the past 18 months both companies were “right-sized” for current levels of activity, and there would not be much impact, if any, on jobs.
Schlumberger employs around 77,000 people in 80 countries worldwide, including 3,500 in the UK, of whom 1,700 are in Scotland – most in Aberdeen – and Smith employs 21,000-plus in more than 80 countries.
Smith did not respond to an inquiry about its numbers in the UK, but it has operations in Aberdeen and at Portlethen.
Andrew Gould, chief executive of Schlumberger, said: “We firmly believe that the next breakthrough will be through engineered drilling systems that optimise all the components of the drillstring; allowing our customers to drill more economically in demanding conditions.
“Smith’s drilling technologies, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide.”
John Yearwood, chief executive of Smith, said: “This transaction brings our shareholders significant value and the opportunity to integrate with and own a meaningful share of a recognised technology leader in an extensive number of fields.
“Schlumberger offers Smith enhanced engineering and design capability to place our products and expertise at the centre of the total drilling system of the future.
“We look forward to a successful combination with Schlumberger and have no doubt that our customers will see accelerated technology development and that our employees will enjoy enhanced opportunities.”
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