Story by Bloomberg
The largest industrial companies in the world, from Caterpillar Inc. to Honeywell International Inc., are about to get a rare chance to go big on oil.
They’re among more than half a dozen manufacturers — including Siemens AG, Dover Corp., and General Electric Co. — that are weighing offers for oilfield-services assets worth $5 billion to $10 billion that Halliburton Co. is preparing to sell, people with knowledge of the matter said.
Also mulling bids are Emerson Electric Co. and Danaher Corp., the people said, asking not to be identified discussing private information. Halliburton and Baker Hughes Inc. are selling up to four overlapping business lines to win regulatory approval for their $34.6 billion deal.
The industrial players see the deal as a rare opportunity to expand in the oil and natural gas industry in one fell swoop, the people said. Halliburton is preparing to send offering materials to those companies, as well as private-equity firms and rival oilfield-services providers, in the coming weeks, the people said.
“These are great businesses,” said Robert MacKenzie, director of research with Iberiabank Corp.’s capital markets division. “Once in a generation do you see industry leading businesses come to market in an open-type sale.”
Representatives for Caterpillar, Emerson, Honeywell, Halliburton and GE declined to comment. Spokespeople for Siemens, Dover and Danaher didn’t return calls for comment.
First up will be the drill bits unit and another that uses data to track and steer the direction of drills, the people said. They’re worth as much as $5 billion in total, people with knowledge of the matter said last month. Halliburton is also talking with the U.S. Department of Justice about separating parts of the companies’ cementing and completion tools businesses, which together could fetch more than $5 billion, the people said.
Some of the industrial companies may decide not to bid after evaluating the assets, given the volatility in oil prices that has sapped demand for drilling services and parts, the people said.
Still, they have two potential advantages over buyout firms and oilfield-services providers expected to be in the mix, the people said. Their high credit ratings give them better access to debt financing than private equity firms, which means they can make higher offers while still generating good returns, one person said.
Their edge over oilfield services companies that analysts have pegged as logical bidders for Halliburton’s cast-offs — including National Oilwell Varco Inc. and Superior Energy Services Inc. — comes down to competition: Halliburton doesn’t want to give any more market share to companies that already offer the same services, the people said. That means it would prefer selling to a new player entering the market.
Some of the industrial companies already have oil and gas businesses: GE’s oil unit acquired more than $10 billion in assets over the past five years, including the $3.3 billion for artificial-lift maker Lufkin Industries Inc. in 2013.
In a February interview, Lorenzo Simonelli, chief executive officer of GE Oil & Gas, said he will look to make opportunistic acquisitions through the market downturn.
Siemens agreed to buy energy equipment maker Dresser-Rand Group Inc. for $7.6 billion last year. Honeywell provides equipment for offshore rigs and pipeline operators, while Caterpillar makes engines, generators and products used in drilling and compressing gas.
Caterpillar signaled a willingness to do deals in the energy sector in March, when an analyst asked the company about its appetite for oil and gas takeovers at an industry conference.
“Our balance sheet is in very good shape, so we have the capability and the capacity to do more M&A if the right targets present themselves” said Richard Moore, Caterpillar’s director of investor relations, according to a transcript compiled by Bloomberg.