National Oilwell Varco Inc. (NOV:US), the biggest U.S. maker of oil-field equipment, plans to spin off its distribution business, a “hardware store” for energy companies that may be worth $3.3 billion.
Bolstered by the acquisitions last year of a Schlumberger Ltd. (SLB:US) unit and CE Franklin Ltd., “the company’s distribution business now has the market size and scale to operate as a standalone, world class, distribution company,” Pete Miller, chairman and chief executive officer of Houston-based National Oilwell, said in a statement today. The transaction will be done as a “tax-efficient” spin off, with both businesses publicly traded, the company said.
The distribution business is the smallest of National Oilwell’s three units and provides maintenance, repairs and supplies to oil and natural gas companies. It generated $3.93 billion in sales last year, with an operating profit of $185 million, up 37 percent from 2011, according to data compiled by Bloomberg. The unit is “a hardware store” for energy companies, said Loren Singletary, a spokesman for National Oilwell. He declined to comment on a potential value.
“Distribution isn’t why investors own NOV and these businesses tend to be more highly valued by strategic partners,” Tudor Pickering Holt & Co. analysts said in a note today. Based on the earnings multiples from MRC Global Inc. (MRC:US), a distributor of pipes, valves and fittings to the industry, the unit would be worth about $3.3 billion, Tudor Pickering wrote.
The business will have more than 415 locations and operate in 26 nations. The transaction is expected to be completed in the first half of 2014, the company said.
National Oilwell fell 10 cents to $78.40 at 9:59 a.m. in New York. The shares have gained 15 percent this year, the same rise as the Standard & Poor’s 500 Energy Index.
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