Leading oilfield services company SLB (SLB.N) revealed on Tuesday its intention to acquire smaller competitor ChampionX (CHX.O) in an all-stock transaction valued at $7.75 billion, amid a trend of increasing consolidation in the North American energy industry. The move reflects a strategic response to operational and pricing challenges faced by oilfield service providers, aligning with customer preferences for reduced spending on new wells in favor of improved investor returns.
This acquisition marks SLB’s second major purchase within a week and represents its largest acquisition since 2016 when it acquired oilfield equipment manufacturer Cameron International for $14.8 billion. Notable recent mergers in the sector include the agreement between Patterson-UTI Energy and NexTier Oilfield Solutions to merge in an all-stock transaction, forming a $5.4 billion oilfield services entity. SLB’s latest deal aims to enhance its capabilities by incorporating production chemicals and artificial lift technologies into its product portfolio.
Analysts anticipate an increase in the use of production chemicals as global assets mature, with the acquisition bolstering SLB’s presence in chemically intensive offshore operations. Shareholders of ChampionX are set to receive 0.735 shares of SLB common stock or $40.59 per share, representing a premium of 14.7% over ChampionX’s recent closing price. Following the announcement, ChampionX shares surged by 9% in early trading, while SLB experienced a slight decline of nearly 2%. SLB anticipates achieving annual pre-tax savings of approximately $400 million within the first three years post-closure, expected before the conclusion of 2024.
The deal is projected to result in ChampionX shareholders owning approximately 9% of SLB’s outstanding shares. Furthermore, SLB intends to return $7 billion to shareholders over the next two years and elevate its 2024 shareholder returns target to $3 billion, aligning with its focus on delivering robust returns and implementing a capital-light strategy.