Cameron shares pop 45% on Schlumberger buyout

Schlumberger Limited said it will merge with oilfield equipment maker Cameron in a stock and cash transaction valued at $12.7 billion that will create the world's largest oil-field services company.

Under the deal, approved by the boards of both companies Wednesday, Cameron shareholders will receive 0.716 shares of Schlumberger stock as well as $14.44 in cash for each Cameron share.

Based on the closing stock prices of both companies on August 25, 2015, the agreement gives Cameron shares a value of $66.36 per share, which represents a 56.3% premium to Cameron’s most recent closing stock price of $42.47 per share.

Shares of Cameron jumped 44% in pre-market trading. Shares of Schlumberger fell 2% to $71.05 a share in pre-market trading.

The deal comes at a time of increased consolidation in the oil industry as companies seek to protect themselves from falling energy prices. In April,  Royal Dutch Shell agreed to fork over $70 billion purchase of Britain's BG Group in a deal to create the biggest global producer of liquefied natural gas, a fast-growing market expected to boom as developing countries and industrial energy users convert from coal and oil. And last year Halliburton agreed to buy Baker Hughes Inc. in a $35 billion deal intended to allow it to better compete with Schlumberger.

The transaction is subject to Cameron shareholders’ approval and regulatory approval. It is anticipated that the closing of the transaction will occur in the first quarter of 2016.

If approved, the transaction is expected to be boost earnings per share in first year after the deal closes, Schlumberger said. The combined company expects $300 million in "synergies," including reduced operating costs and streamlined supply chains, in first year of the merger. The cost benefits of the deal will rise to $600 million in the second year, the company said.

This agreement with Cameron opens new and broader opportunities for Schlumberger," said Paal Kibsgaard, chairman and CEO of Schlumberger said in a statement. "With oil prices now at lower levels, oilfield services companies that deliver innovative technology and greater integration while improving efficiency, which our customers increasingly demand, will outperform the market."