Smith International May Have Several Suitors

Rumored takeover by Schlumberger could be worth over $8B, but analysts say other potential bidders are lurking.

With signs of an M&A recovery picking up across a number of sectors, there has been chatter that suggests another blockbuster in the oil services space may be on the way.

Shares of oil and gas company Smith International surged 13% to close at $37.70 Friday on reports that said larger industry rival Schlumberger Limited ( SLB - news - people ) might be in talks to acquire the company in a deal that one analyst estimates could be worth north of $8 billion.


Canaccord Adams analyst John Tasdemir said he would not be surprised if Schlumberger were courting Smith, adding significant synergies given the businesses’ overlap in their joint venture, MI Swaco, a hydrocarbon exploration and production company. Schlumberger has a significant cash balance of nearly $5 billion and has openly talked about growing its business both organically and inorganically through acquisitions, Tasdemir told Forbes, including discussions about Smith International specifically. Smith would add drill bits, solids control and supply management to Schlumberger’s business, the analyst noted.

“It’s logical that [Schlumberger] would be talking to Smith,” Tasdemir said, because Schlumberger is “the most logical player and would be able to pay the most for [Smith].” Tasdemir could not say when he expects a deal to be announced, but anticipates Schlumberger will bid a per-share price at a 20% premium to Thursday’s closing price, or $39.66 per share. At that price, the deal could be worth $8.7 billion.

Smith International could not be reached for comment, and messages left for Schlumberger were not returned.

A potential Schlumberger-Smith would come on the heels of August's $5.5 billion acquitision of oilfield services firm BJ Services ( BJS - news - people ) by rival Baker Hughes ( BHI - news - people ). At the time, Baker Hughes said the merger would allow it to broaden its product line and take on the industry's giants such as Halliburton ( HAL - news - people ) and Schlumberger for projects that require multiple services.