Baker Hughes-BJ Services deal underscores M&A revival

Baker Hughes Inc. (BHI), the world's third-largest oilfield services company, today agreed to snap up smaller rival BJ Services Co. (BJS) for $5.5 billion in cash and stock in an old-school merger. The deal seems to be so 2006 that it's practically quaint as the offer from Baker Hughes represents a 16.3 percent premium over the closing price of BJ Services stock on Friday, August 28, 2009.

The acquisition actually appears to be a decent deal for BJ Services holders, who saw their company report a third fiscal quarterly loss of $32.3 million, or 11 cents per share because of decreased demand for oil and natural gas. Shares of the Houston-based company fell more than 42 percent over the past year.
BJ Services stockholders will receive 0.40035 shares of Baker Hughes and cash of $2.69 in exchange for each share of BJ Services common stock under the terms of the agreement. Upon closing, BJ Services stockholders collectively will own approximately 27.5 percent of Baker Hughes' outstanding shares.

The deal would be the third-largest announced in the U.S. behind the $68 billion Pfizer Inc-Wyeth merger and the $41 billion Merck-Schering Plough deal, according to CurrentPartnering. Before the start of the year, pundits' outlook for mergers and acquisitions was quite disastrous given the state of the economy. Now, it looks like these forecasts may have been a little dire.

Just a little.

Look for more companies to snap up deals on the cheap. Given the historically rock-bottom valuations of many companies, they would be foolish not to.

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