April 16, 2024 | Energy | North America | Active

ChampionX / SLB: Deal Insight

Leading oilfield services company Schlumberger (“SLB”) announced that it has agreed to acquire chemistry solutions provider ChampionX in an all-stock transaction that values ChampionX at $7.8bn. The terms of their agreement, announced on 2-Apr-24, and unanimously approved by the target’s board, stipulate that ChampionX shareholders will receive 0.735 shares of SLB common stock for each ChampionX share. The offer consideration values each ChampionX share at $40.59, implying 14.7% one-day takeover premium, and through the merger ratio, ChampionX shareholders owning nearly 9% of SLB upon closing. ChampionX will continue to pay its customary dividends, not in excess of $0.095 per quarter, and SLB will also maintain is current dividend policy. Concurrent with the M&A announcement, SLB announced $7bn in shareholder payouts over the next two years, targeting returning $3bn in 2024 (previously $2.5bn) and $4bn next year. The deal is subject to ChampionX shareholder approval; a SLB shareholder vote is not required. Conditions include HSR approval, and a filing is expected within 15 business days (by 23-Apr-24). A burdensome clause notably restricts SLB from divesting target assets that represent 8% of ChampionX’s 2023 revenues, and these cannot be any chemical technologies businesses of ChampionX. The sole caveat pertains to shared assets, generally defined as broad contracts and agreements that cover both ChampionX’s chemical technologies business and its other operations. For the purposes of offering remedies, ChampionX must use reasonable best efforts to separate its shared assets into separate arrangements, and then only offer remedies concerning its non-chemical technologies businesses. The companies have not yet concluded whether the deal requires CFIUS approval, but a filing will be made with the committee if SLB determines in its “sole and absolute discretion” that such an approval is required under the Defense Production Act of 1950 (DPA). Should SLB determine that it needs CFIUS clearance, it will inform ChampionX and, within 10 business days, the companies will jointly file a draft notice. The merger agreement does not impose any obligations on SLB to propose remedies to secure CFIUS clearance. Otherwise, the merger agreement includes customary clauses covering representations, warranties, covenants, and MAC, with specific carve-outs related to war and pandemics. ChampionX has agreed to a non-solicitation clause...

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