National Oilwell Varco Inc (NOV.N), the largest U.S. oilfield equipment maker, said it will buy Robbins & Myers Inc RBN.N for $2.54 billion to expand its product line of well tools, pumps and valves.
Robbins & Myers shareholders will receive $60 per share, a 28 percent premium to the stock's Wednesday close of $46.80 on the New York Stock Exchange.
The deal is expected to close in the fourth quarter, pending approval of two-thirds of R&M shareholders, the companies said.
The purchase is National Oilwell Varco's biggest since its 2008 buy of Grant Prideco in 2008, according to Barclays analyst James West, and is likely to add about 25 cents per share to its 2013 earnings.
"With roughly $1.9 billion in cash on its balance sheet, most of which is held in operations outside the U.S., we assume the company will likely have to borrow all $2.5 billion to fund the deal," West said in a note to investors.
National Oilwell Varco did not immediately respond to a query on how it would fund the deal.
R&M has sought to streamline it operations since its purchase of T-3 Energy Services early last year, and had created two main business segments, energy services and process and flow control.
The company's largest shareholder is M.H.M. & Co, which is majority owned by descendants of Maynard H. Murch, an Ohio banker who died in 1966 and is credited with putting together Whirlpool Corp.
M.H.M. owned about 12 percent, or 5.2 million shares, of the company, according to filings from late last year. That stake was valued at about $242 million before the deal was announced.
National Oilwell Varco's chairman, Thomas P. Loftis, also owns Loftis Investment LLC, which is a general partner of M.H.M., according to the company's website.
R&M has an ongoing labor dispute at its Moyno manufacturing facility in Springfield, Ohio, where workers rejected a contract and halted work in March. R&M said in a recent Securities and Exchange filing that operations at the facility have continued during the dispute.
R&M's earnings before interest and taxes for the first three fiscal quarters of its reporting year were $171.6 million on sales of $760 million, about half of which came from outside the United States.
Citigroup Global Markets acted as lead financial adviser and Thompson Hine LLP acted as legal adviser to R&M. Fulbright & Jaworski LLP acted as legal adviser to National Oilwell Varco.
National Oilwell Varco's shares erased early losses to trade up 0.7 percent to 76.88 per share, while R&M shares jumped 27 percent to $59.50.
(Reporting by Swetha Gopinath in Bangalore and Matt Daily in New York; Editing by John Wallace, Maureen Bavdek and David Gregorio)