Varco To Acquire ICO Business Unit
Varco International Inc. has entered into a definitive purchase agreement with ICO Inc. to acquire substantially all of ICO's oilfield services business for approximately $136.7 million, plus the assumption of trade payables and certain other accrued operating expenses.
ICO Inc.'s oilfield services business provides inspection, coating and reconditioning of drillpipe, tubing, casing and sucker rods used in oil and gas operations. Additionally it sells and rents equipment and supplies used in the inspection of tubular goods and sucker rods.
Tubular goods used in the oilfield are often inspected to identify defects, which may lead to premature failure downhole, and are sometimes coated to prevent corrosion or improve flow characteristics. Sucker rods are used to connect downhole pumps with pump jacks at the surface, to lift oil out of the ground.
ICO's oilfield services business operates with approximately 900 employees throughout North America, Southeast Asia and England. The oilfield service business of ICO to be acquired in the transaction generated approximately $125 million in sales and $18 million in operating profit in its fiscal year ended Sept. 30, 2001.
"We look forward to closing this acquisition of a strong oilfield services franchise, which will strengthen Varco's Tuboscope worldwide tubular services business and enable us to provide better, more comprehensive service to our customers," noted George Boyadjieff, chairman and chief executive officer of Varco International Inc. "It will provide Tuboscope an entrance into the sucker rod market, and enable us to achieve better efficiencies and reduce costs in the combined operations." The Company stated that preliminary estimates of annual cost savings of approximately $6 million are expected to accrue as a result of the transaction.
Under the purchase agreement Varco will acquire the assets of ICO's oilfield services business in the U.S., Mexico, Southeast Asia and Europe and the stock of ICO's Canadian operating subsidiary. The final purchase price is subject to an adjustment for working capital changes in the business, and debt and cash levels of the acquired Canadian subsidiary. Closing of the transaction is subject to customary regulatory approvals.