Weatherford International plc (WFT) agreed to sell its chemicals and drilling fluids businesses to Lubrizol Corp., a unit of billionaire Warren Buffett's Berkshire Hathaway Inc. (BRK.B) , for $825 million, helping it pay down more debt.
The price includes $750 million in cash and a $75 million earnout provision tied to the businesses' performance after the deal closes.
No investment bankers were involved in the sale, a source said.
Weatherford expects to close the transaction by the end of the year if it clears regulators.
Tudor, Pickering, Holt & Co. Securities Inc. wrote in its morning report that it's positive that Weatherford was able to jettison non-core businesses despite energy market turmoil, including sliding oil prices, helping it surpass its $7 billion to $7.5 billion net debt target by the end of this year. "[It] feels like WFT [is] getting good value on the sale," the firm said, noting that Weatherford's non-core portfolio generated $630 million in third quarter revenues with a slim 3% operating margin.
The sale didn't come as a surprise, as Switzerland-domiciled Weatherford mentioned on its third quarter earnings conference call that a non-core asset sale was imminent and that it was targeting $1 billion in asset sales this year. Weatherford is expected to sell another business by the end of the year or early next year, likely its testing and production services unit, Global Hunter Securities Inc. analysts Mark Brown and Matthew Zukowsky wrote in a report.