Wow, i guess the HAL - DI merger is huge:
Halliburton to Buy Dresser
In $7.7 Billion Stock Deal
Combined Oil-Field Giant
Will Be the Industry Leader
By STEVEN LIPIN and PETER FRITSCH
Staff Reporters of THE WALL STREET JOURNAL
Halliburton Co. reached an agreement to acquire Dresser Industries Inc.
for about $7.7 billion in stock, bringing together two of the nation's leading
oil-field-services concerns. The boards of both companies approved the
transaction, and an announcement is expected Thursday, according to
people familiar with the situation.
The union of the two Dallas-based rivals will create a giant with $16.3
billion in revenue, 100,000 employees and a backlog of more than $13
billion in business contracts. The merged company would leapfrog
Schlumberger Ltd. to become the world's largest oil-field-services
concern, with a strong engineering and construction business.
The oil-field-services business has been booming in recent years amid an
upturn in oil drilling. But major oil companies now want the full panoply of
services. Halliburton's aim is to offer clients sophisticated services from
upstream to downstream -- from lowering costs for finding oil deposits to
getting petroleum out of the ground and transporting it.
People familiar with the matter say the deal is valued at $44 a share in
Halliburton stock for each Dresser share, a 14% premium over Dresser's
closing price Wednesday of $38.6875, up $1, on the New York Stock
Exchange. Each Dresser share will be exchanged for one share of
Halliburton, these people said. The combination is expected to add to
Halliburton's earnings. Halliburton shares closed Wednesday at $44, up
$1.0625, also on the Big Board.
A Strategic Merger
Following completion of the deal, structured as a strategic merger, William
E. Bradford, Dresser's 63-year-old chairman and chief executive, will be
chairman of the combined company. Richard Cheney, 57, Halliburton's
chairman and chief executive, will be chief executive of the merged
company. The president and chief operating officer will be David Lesar,
44, Halliburton's president and chief operating officer. Donald C. Vaughn,
Dresser's 62-year-old president and chief operating officer, will be vice
chairman.
The new company, which will keep the Halliburton name, will have a
14-member board: Halliburton's nine directors and five of Dresser's 12
directors. The transaction will be tax-free to shareholders, and structured
using so-called pooling-of-interests accounting to avoid charges against
earnings.
While the oil-services sector enjoyed spectacular share-price appreciation
in 1996 and early 1997, in recent months it has suffered in equity markets
as a global glut of oil and natural gas has begun to make itself more
evident, causing petroleum prices to fall and oil and natural-gas companies
to cut back on their exploration and production programs.
Halliburton, with 1997 revenue of $8.8 billion, has revved up under Mr.
Cheney, a former U.S. defense secretary who was named chief executive
in October 1995. He reorganized the company's various subsidiaries into a
more integrated company.
Recent Acquisitions
The company has spent $1 billion on niche acquisitions in areas such as
advanced instrumentation used by drillers. In 1996, Halliburton purchased
Landmark Graphics Corp., a company that sold software for seismic
interpretation of petroleum reservoirs. Last year, it acquired Numar Corp.,
which helps drillers gather information at well-sites through magnetic
resonance imaging.
Halliburton reported a 51% rise in 1997 earnings to $454 million, or
$1.75 a fully diluted share, compared with $300.4 million, or $1.19 a
share, a year before.
Dresser, with 1997 revenue of $7.4 billion, is one of the largest fully
integrated oil-service companies in the world. Founded in 1880, the
company employs roughly 30,000 and generates some two-thirds of its
sales outside the U.S.
In the engineering and construction side of the business, the merger would
be complementary, people familiar with the deal say. Dresser's M.W.
Kellogg division is better known for its engineering capabilities, while
Halliburton's Brown & Root unit is a strong construction player in the
energy business. Dresser is also known for its drilling systems. A person
close to Halliburton said melding the companies business lines and cultures
should be like "fitting yin together with yang."
In the fiscal year ended Oct. 31, Dresser reported earnings of $318
million, or $1.81 a share, compared with $257.5 million, or $1.44 a share,
a year earlier.
SBC Warburg Dillon Read Inc. and Goldman, Sachs & Co. are
representing Halliburton, while Dresser is being advised by Salomon Smith
Barney.
Dan R. Pickering, director of research for oil-services boutique Simmons
& Co. International in Houston, said oil-services concerns generally are
ripe for consolidation. "The important thing to remember is that the
companies involved in this business survived the early 1990s by
consolidating," he said. "So in an environment with oil-price fundamentals
not helping the business, they need to start thinking of ways to help
themselves." |
