Boots & Coots has agreed to sell out to Halliburton for $240.4 million. In 1978, Edward "Coots" Matthews and Asger "Boots" Hansen founded Boots & Coots (WEL). Both were veteran oil-well firefighters. In fact, they provided inspiration for a 1968 film called Hellfighters, starring John Wayne.

But the days of independence have come to an end for Boots & Coots as the company has agreed to sell out to Halliburton (HAL) for $240.4 million. Shareholders will get $1.73 in cash and $1.27 in Halliburton stock for every share of Boots & Coots.

The company certainly has a distinguished history. It has been critical in dealing with many well fires, including those from Iraq's 1990 invasion of Kuwait. But given its relatively small size, Boots & Coots has been at a disadvantage. As a result, the stock price has been mostly lackluster over the years.

A Perilous Business


Boots & Coots has two core businesses. First, there is Pressure Control, which involves prevention and risk-control services for oil- and gas-well fires and blowouts. A key to this area was the acquisition of John Wright, which developed sophisticated technologies to measure well integrity.

Next, Boots & Coots has a Well Intervention division, which helps enhance production for oil and gas operators. This business is likely to benefit nicely from the trend toward unconventional resource plays (such as extracting energy from shale). Boots & Coots greatly expanded this division with the acquisitions of Oil States International and StassCo.

Despite all this, the company is still at the whim of volatile energy markets, as well as unpredictable government-owned oil companies. For example, last year Boots & Coots saw a 7% fall in revenues to $195.1 million, with net income down from $21.8 million to $6 million. Keep in mind that during this period, there was nearly a 50% drop in domestic rig counts.

But as part of Halliburton, Boots & Coots will have more leverage to expand its platform, especially in areas like Africa and even Southeast Asia, which should provide significant growth opportunities.

Feeling Left Out?

According to its latest earnings report, Halliburton is upbeat about the prospects for 2010. Actually, it looks like there will be a rebound in North America because of increased demand and rig counts. At the same time, it appears that Halliburton is gaining more market share from its struggling rivals.

But when it comes to M&A, Halliburton has been timid. Just look at Schlumberger (SLB), which recently agreed to shell out $11 billion for Smith International (SII) and $1.07 billion for Geoservices. Of course, there is also the $5.5 billion merger of Baker Hughes (BHI) and BJ Services (BJ).

So, will Halliburton try for a major deal, too? Perhaps. The company has $3.4 billion in the bank and easy access to financing. Yet, the oil services industry has undergone lots of consolidation, and few major targets are left. And a deal could ultimately suffer from antitrust pressure.

In other words, Halliburton may focus its dealmaking on small companies that fill out niches, like Boots & Coots.

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