Under the terms of the transaction, Smith became a wholly-owned subsidiary of Schlumberger. Each share of Smith
common stock issued and outstanding immediately prior to the effective time of the acquisition was converted into the
right to receive 0.6966 shares of Schlumberger common stock, with cash paid in lieu of fractional shares.
The following details the fair value of the consideration transferred to effect the acquisition of Smith.
(Stated in millions, except exchange ratio and per share amounts)
Number of shares of Smith common stock outstanding as of the acquisition date
248
Number of Smith unvested restricted stock units outstanding as of the acquisition date
4
252
Multiplied by the exchange ratio
0.6966
Equivalent Schlumberger shares of common stock issued
176
Schlumberger closing stock price on August 27, 2010
$ 55.76
Common stock equity consideration
$ 9,812
Fair value of Schlumberger equivalent stock options issued
16
Total fair value of the consideration transferred
$ 9,828
Certain amounts reflect rounding adjustments
Prior to the completion of the acquisition, Smith and Schlumberger operated M-I SWACO, a drilling fluids joint
venture that was 40% owned by Schlumberger and 60% owned by Smith. Effective at the closing of the transaction, M-I
SWACO became 100% owned by Schlumberger. As a result of obtaining control of this joint venture, Schlumberger was
required under generally accepted accounting principles to remeasure its previously held equity interest in the joint
venture at its acquisition-date fair value and recognize the resulting pretax gain of $1.3 billion ($1.2 billion after-tax) in
earnings. This gain is classified as
Gain on Investment in M-I SWACO
in the
Consolidated Statement of Income
.
Prior to acquiring Smith, Schlumberger recorded income relating to this joint venture using the equity method of
accounting. Schlumberger’s equity income from this joint venture was $78 million in 2010 (representing the period
from January 1, 2010 to August 27, 2010). Schlumberger received cash distributions from the joint venture of $50
million in 2010.
Acquisition of Geoservices
On April 23, 2010, Schlumberger completed the acquisition of Geoservices, a privately owned oilfield services
company specializing in mud logging, slickline and production surveillance operations, for $915 million in cash.
Other
Schlumberger has made other acquisitions and investments, none of which were significant on an individual basis,
for cash payments, net of cash acquired, of $845 million during 2012, $610 million during 2011, and $212 million during
2010.
On November 15, 2012, Cameron International Corporation (“Cameron”) and Schlumberger announced that they
had entered into an agreement with respect to the creation of OneSubsea, a joint venture to manufacture and develop
products, systems and services for the subsea oil and gas market. Schlumberger will own 40% of OneSubsea. The
transaction is subject to regulatory approvals and other customary closing conditions and is expected to close by the
second quarter of 2013. Under the terms of the formation agreement, Cameron and Schlumberger will each contribute
all of their respective subsea businesses to the joint venture and Schlumberger will make a $600 million cash payment
to Cameron. In accordance with generally accepted accounting principles, upon the closing of this transaction,
Schlumberger will recognize a gain as a result of the deconsolidation of its subsea business. This pretax gain will be
equal to the difference between the fair value of the Schlumberger subsea businesses and their carrying value at the
time of closing and is currently estimated to be in excess of $1.2 billion.
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