Baker Hughes to Buy BJ Services for $5.5B

Updated from 6:25 a.m. EDT

HOUSTON (TheStreet) - Oilfield services company Baker Hughes (BHI Quote) plans to acquire BJ Services(BJS Quote) in a cash-and stock transaction valued at about $5.5 billion.

BJ Services shareholders will receive a 16.3% premium over the stock's closing price Friday of $15.43. BJ Services' shareholders will receive 0.40035 a share of Baker Hughes and cash of $2.69 in exchange for each BJ Services share. BJ Services stockholders will own about 27.5% of Baker Hughes' outstanding shares once the deal closes.

In a statement Monday, Baker Hughes said it expects to realize annual cost savings of about $75 million in 2010 and $150 million in 2011. It expects the acquisition to add to per-share earnings in 2011.

Baker Hughes Chairman, President and CEO Chad Deaton said in a statement that the transaction will particularly help customers with unconventional gas and deepwater fields.

"It will better position us to drive international growth and to compete for the growing large integrated projects by incorporating pressure pumping into our product offering," he added. Integrated oil companies are active in all phases of the business including production, refining, transportation and marketing.

Pressure pumping made up less than 1% of Baker Hughes 2008 revenue, but is expected to make up about 20% of the company's revenue after the deal is complete.

Two BJ Services board directors will be appointed to the board of Baker Hughes.

The companies say the merger could close as soon as the end of the calendar year.

Baker Hughes shares closed Friday at $38.09.

-- Reported by Joseph Woelfel in New York .

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