Baker Hughes to Acquire BJ Services for $5.5 Billion

August 2009 Vol. 236 No. 8

Baker Hughes Incorporated and BJ Services Company announced August 31 that their boards of directors have approved a definitive merger agreement, which represents a transaction value of $5.5 billion for BJ Services.

The deal combines BJ Services’ Leading Pressure Pumping Business with Baker Hughes’ Diversified International Franchise.

Baker Hughes expects to realize annual cost savings of approximately $75 million in 2010 and $150 million in 2011 as it eliminates redundant costs, consolidates facilities, and further rationalizes field costs.

“Our two companies have highly complementary products and services with very little overlap,” said Chad C. Deaton, Baker Hughes’ chairman, president and chief executive officer. “Baker Hughes has a long record of partnering with BJ Services on major projects. The proposed merger will make Baker Hughes a stronger, more efficient service provider for our customers worldwide, by integrating pressure pumping with Baker Hughes’ wide range of products and services.”

Although pressure pumping accounted for less than 1% of Baker Hughes’ revenues in 2008, it is expected to generate approximately 20% of the combined company’s revenues, providing Baker Hughes with revenues from pressure pumping that approaches its two largest competitors. Pressure pumping has grown in importance as customers have looked for new ways to unlock the full value of their reservoirs. The number of fields requiring pressure pumping services is expected to grow, especially outside of North America, where BJ Services can leverage Baker Hughes’ extensive international presence as it pursues growth opportunities.

The agreement represents a premium to BJ Services stockholders of 16.3% over the closing price of BJ Services stock on August 28, 2009. Under the agreement, BJ Services stockholders will receive 0.40035 shares of Baker Hughes and cash of $2.69 in exchange for each share of BJ Services common stock. Upon closing, and reflecting the issuance of new Baker Hughes shares, BJ Services stockholders collectively will own approximately 27.5% of Baker Hughes’ outstanding shares. Baker Hughes expects the aquisition to be accretive to earnings per share in 2011.

The Baker Hughes Board of Directors will be expanded to include two BJ Services Board members.

The merger is subject to the approval of both Baker Hughes’ and BJ Services’ stockholders as well as other customary approvals. The companies anticipate that the transaction could close as soon as the end of the calendar year. Baker Hughes and BJ Services intend to file a joint proxy statement / prospectus with the Securities and Exchange Commission as soon as possible.

Baker Hughes’ website