Schlumberger to Sell Some Gas Assets to Hanover Compressor
Hanover Compressor
(HC)
agreed to acquire the natural gas business of
Production Operators
, as well as ownership interests in certain natural gas compression and gas handling joint venture projects in South America, from
Schlumberger
(SLB) - Get Report
.
Hanover will pay Schlumberger $270 million in cash and a $150 million long-term subordinated note. Hanover will also give Schlumberger newly issued shares worth $283 million. The number of shares will depend on the average closing price of Hanover's stock 30 days prior to the close of the deal. (See this
previous story for options activity in Hanover prior to the closing of the deal.) Schlumberger could also receive up to $58 million from one of the joint ventures Hanover is acquiring.
Hanover, which provides services and equipment for natural gas processing and handling, expects the transaction to annually add $200 million in revenue and $90 million to earnings before interest, taxes, depreciation and amortization within one year of completing the deal.
Schlumberger will own a 10% stake in Hanover after the companies close the pact. Schlumberger will hold its Hanover stock for at least three years after closing the sale and won't acquire more than 25% of the company during that time period. For the next five years, oil services concern Schlumberger will have a seat on Hanover's board, as long as it owns at least 5% of the company.
Shares of Hanover lost 6% to $32.65, and Schlumberger dropped 1.5% to $52.25 on the
New York Stock Exchange
. Earlier in the session, Schlumberger traded at a 52-week low of $51.15.