Schlumberger agreed to buy Smith International in a $11.3 billion (Dh41.4bn) all-stock deal that will boost the oilfield services leader's revenue to double that of its nearest rival.
The deal, still subject to shareholder and regulatory approval, values Smith Stock at $45.84, a 37.5 per cent premium over Thursday's closing price, according to a joint statement.
The acquisition is the latest in a string of oilfield services deals as the sector begins to recover.
Profits had plummeted as oil and natural gas companies cut spending on projects when energy prices collapsed along with economic activity in 2008.
After the deal, Schlumberger would boast revenue double that of nearest rival Halliburton, which had 2009 revenues of $14.7bn.
"Smith's drilling technologies, other products and expertise complement our own, while the geographical footprint of Schlumberger means we can extend our joint offerings worldwide," said Andrew Gould in a statement.
Schlumberger said it expects the acquisition to add to earnings per share in 2012. The company also expects to realise pretax synergies after costs of about $160 million in 2011 and about $320m in 2012.
Under the terms of the deal, Smith shareholders will receive 0.6966 shares of Schlumberger for each Smith share.
On closing, Smith shareholders will hold about 12.8 per cent of Schlumberger's outstanding shares.
The Wall Street Journal had reported on Friday that Schlumberger was in advanced talks to buy Smith International.
Smith International shares climbed 13 per cent on Friday to $37.70. Shares in Schlumberger closed down 2.9 per cent at $63.90. Analysts on Friday said the deal would likely get a hard look from anti-trust regulators.
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