Cameron adds to drilling equipment, rig components offering with LeTourneau acquisition

By Oil & Gas Financial Journal staff

Cameron International Corp. (NYSE: CAM) has agreed to acquire LeTourneau Drilling Systems and Offshore Products from Joy Global for US$375 million in cash.

Joy Global closed on the acquisition of LeTourneau, a provider of drilling equipment and rig designs and components for both the land and offshore rig markets, in June 2011 for $1.1 billion.

LeTourneau’s onshore and offshore products include elevating systems, skidding systems, cranes, top drives, rotary tables, draw works, mud pumps and rig control and power systems. The installed jackup based of LeTourneau design jackups includes 133 rigs, 13 more under construction and options for another 2 units.

Analysis
The acquisition, with an estimated cost to Cameron of roughly 7x EBITDA, is viewed favorably by Global Hunter Securities (GHS) analysts.

“We view the acquisition favorably, while not a needle mover in terms of backlog add (last published figure was $246.3 million as of 1Q11) and quarterly revenues and earnings, the LeTourneau technology suite will allow CAM to sell complete kits (if it improves the LTI topdrive design), similar to National Oilwell Varco. The limitation previously was due to some conflicts of interest that were inherent with a drilling contractor owning the business and we believe CAM can add to backlog on both land and offshore,” said GHS analysts in an August 31 report.

Credit Suisse Securities (USA) LLC advised Cameron in connection with the transaction. Porter Hedges LLP are serving as legal advisor.

The deal is expected to close in 4Q11.



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