Dow Jones Newswires’ Brian Baskin writes:
Baker Hughes (BHI) and BJ Services (BJS) have almost nothing in common, making them perfect candidates for a merger, Jefferies writes.
BJ Services service makes up less than 1% of Baker Hughes’s 2008 revenue. Baker Hughes is expanding internationally, while BJ Services is largely focused on the flailing US and Canadian markets.
Of course, North American pressure pumping is one of the hardest hit portions of the services sector, but “BHI needed to add pressure pumping to its product mix…it makes strong strategic sense over the course of the cycle,” firm adds.
But BJ Services shares are trading below the premium being offered by Baker Hughes, signaling that investors aren’t optimistic that their new BHI shares will hold their value. Not a bad move in the short term – Baker Hughes is “paying a stratospheric multiple of ’10 earnings,” given the weak state of BJ Services’ core market for North America gas services, writes Simmons & Co.
The more relevant trend, firm adds, is that once the industry begins to recover, Baker Hughes’s acquisition will look better and better.
Baker Hughes is offering BJ Services shareholders about 0.4 shares of BHI, plus $2.69 in cash. That should translate to $17.94/share, but BJS is trading at $16.42.
Meanwhile, Schlumberger and Halliburton don’t look so special anymore, Wells Fargo writes.
The two giants of the oilfield services sector were alone in being able to offer truly integrated services worldwide, but Baker Hughes joins that club with this acquisition. “SLB and HAL have just seen their key competitive advantage – the ability to bundle … and a broader, more established international footprint – weakened-to-neutralized,” firm says.