Halliburton still in the chase

Halliburton, the US energy services giant, is considering an improved bid for Expro International, a Berkshire based firm specialising in well flow management for oil and gas projects.

Originally, Umbrellastream, a Candover led special purpose vehicle also formed from funds managed by Goldman Sachs Capital Partners and AlpInvest Partners, agreed a £1.6bn deal in April, valuing Expro at £14.35 per share. Halliburton waited until May 23 to respond with a counter-bid of £1.7bn, or £15.25 per share, on the proviso that due diligence could be conducted on Expro’s accounts.

Halliburton was on a tight deadline to launch its bid as Expro had planned an extraordinary general meeting on June 2 to approve the Umbrellastream offer. There was some speculation that Halliburton’s bid was a ploy to buy some time to weigh up its options, as no formal offer would be on the table until due diligence had been completed.

Hoping to benefit from Halliburton’s procrastination, Umbrellastream launched an improved bid of £15.50 per share within hours of Halliburton’s conditional offer. Since then, Expro has delayed its EGM to June 9, supposedly to give shareholders “sufficient opportunity” to consider the improved bid but realistically to afford Halliburton more time to prepare an even greater offer.

The interest in Expro is hardly surprising, as it has performed impressively recently; generating revenues of £610m for the year to March 31, up from £519m in 2006/07.

Firms in the oil and gas services industry have been doing well of late, as the high price of oil has made previously marginal fields very profitable in areas such as the Gulf of Mexico and off the coast of Brazil, but that require extensive surveying and expertise from contractors.

These developments have generated interest from private equity firms, while simultaneously providing firms in this industry with enough cash to make acquisitions of their own.

Most analysts believe that Halliburton will eventually win out as the revised Umbrellastream bid is only slightly above the oil services company’s original offer. This acquisition is enticing to Halliburton as Expro is a leading firm in subsea well testing, where Halliburton lags behind is biggest rival, Schlumberger Ltd., although some believe that the price is already too high.

Halliburton and Expro share good relations as they have worked together in the past, most notably on a recent project for Petrobras in Brazil, where Expro provided ocean floor packages and surface testing equipment while Halliburton provided reservoir information for land-based and offshore Petrobras projects.

Expro also owns what was part of Halliburton’s business; in 2004 it sold part of its well testing division to PowerWell Service Holdings LLC, which was subsequently acquired by Expro for US$670m in 2006.

Despite this, Expro has not stated a preference for this strategic acquisition over Umbrellastream’s investment acquisition as finance director Michael Spinkman has said that it would simply take the best value and price possible.

M&A activity in this sector has amounted to 722 deals worth US$99.2bn so far this year, with private equity firms involved in 55 of these deals worth just over US$7bn.

The largest announced deal has been BG Group’s US$16.5bn unsolicited tender offer for Origin Energy, an Australian integrated energy company that operates in all aspects of the energy supply chain from oil and gas exploration through to energy retailing.