The merger agreement was unanimously approved by each company's board of directors. Upon completion of the transaction it is anticipated that the current stockholders of National Oilwell Varco will own approximately 86 percent of the combined company and the current stockholders of Grant Prideco will own approximately 14 percent.
The transaction is expected to be accretive to earnings and cash flow per share for National Oilwell Varco in 2008, on a pro forma full-year basis and assuming a full year rate of estimated consolidation cost savings of $40 million. Based on National Oilwell Varco's Friday closing price the combined company would have an equity market capitalization of approximately $32 billion.
The transaction is expected to be tax free to Grant Prideco and the stock portion of the consideration will be received tax free by its stockholders. National Oilwell Varco will finance the cash portion of the transaction through a combination of cash on hand and debt, for which bank commitments have been secured.
Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, "We are delighted with the way this transaction advances our strategic goal of providing more products and services to our customers. We believe Grant Prideco's product range will add new growing market segments to National Oilwell Varco and benefit our customers' needs worldwide. We believe this transaction will afford excellent opportunities for the stockholders and customers of both companies. We look forward to welcoming Grant Prideco's employees to the National Oilwell Varco organization and working together to realize the new opportunities we expect to achieve from this combination."
Michael McShane, Chairman, President and CEO of Grant Prideco, Inc., commented, "This is a great transaction for our shareholders in which they realize a significant premium and have the opportunity to participate in a larger, more diverse company. We are looking forward to a successful combination with National Oilwell Varco. The combination with a world class organization such as National Oilwell Varco will provide better opportunities for continued growth of our product lines and for our employees."
The transaction is subject to various conditions including stockholder approval of Grant Prideco and customary regulatory approvals, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. It is anticipated that the Grant Prideco stockholder meeting and the closing of the transaction would occur late in the first quarter or early second quarter of 2008. Goldman, Sachs & Co. acted as financial advisor to National Oilwell Varco and Credit Suisse Securities (USA) LLC acted as financial advisor to Grant Prideco.
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