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September 14, 2010
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Houston-based National Oilwell Varco Inc. (NOV), a leading manufacturer of oil and gas drilling and production equipment, agreed to acquire Advanced Production and Loading PLC (“APL"), a subsidiary of Norway-based BW Offshore Limited, for a total cash consideration of $500 million. The deal is subject to board approval and other conditions.
The unit of BW Offshore designs and manufactures turret mooring systems and other products for Floating Production, Storage and Offloading (FPSO) vessels as well as for other offshore vessels and terminals.
National Oilwell Varco’s wide spectrum of equipment for the offshore oil and gas industry mainly includes FPSO products; AmClyde Turret Bearing System being a prime example. Consequently, APL’s leading presence in the growing FPSO market is expected to enhance National Oilwell’s footprint in the oilfield equipment business by providing new turret products to FPSO owners and operators worldwide.
Per the deal, BW Offshore and National Oilwell Varco will also enter into product supply and non-competition agreements.
Further, the company highlighted that the acquisition provides an opportunity to expand its offerings in the FPSO market, which it considers to be the next phase of deepwater development. The deal is likely to expand National Oilwell's product offering to $100 million per FPSO from the current $25 million per vessel.
Strategically, this integration will make National Oilwell Varco an independent supplier of certain FPSO components complementing its drilling offerings in the offshore market.
Previously, the April 2008 acquisition of Grant Prideco had transformed the company into an oilfield machinery powerhouse with a complete array of drilling equipments. National's expansion of its FPSO product line through the APL acquisition is now expected to offer meaningful growth, going forward.
Acquisitions have historically played a major role in the company’s growth profile and are expected to remain significant in the future as well. National Oilwell Varco might find it difficult to complete accretive transactions in the future, which could negatively impact its growth rate. Hence, we have a Zacks Rank of #3 (short-term Hold recommendation) with the long-term Neutral recommendation for National Oilwell Varco.
Read the full analyst report on "NOV"
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