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UPDATE 2-National Oilwell to spin off equipment distribution business
September 24, 2013 / 11:58 AM / 4 years ago

UPDATE 2-National Oilwell to spin off equipment distribution business

* Distribution business to be a publicly traded company

* National Oilwell says spin-off does not need shareholder approval

By Garima Goel

Sept 24 (Reuters) - National Oilwell Varco Inc plans to spin off its distribution business into a publicly traded company as the largest U.S. oilfield equipment provider struggles with lower margins amid a slowdown in North American gas drilling activity.

Margins in its rig technology business, which accounts for half of National Oilwell’s revenue, eroded in the second quarter also as tight delivery schedules drove up staff and freight costs.

“Given the recent disappointments in margin generation, we believe investors have pressured management to become more focused,” Sanford C. Bernstein analyst Scott Gruber said.

National Oilwell expanded its distribution business last year by acquiring Schlumberger NV’s Wilson Supply distribution unit and equipment distributor CE Franklin, in which Schlumberger held a 56 percent stake.

“We believe the company’s distribution business now has the market size and scale to operate as a standalone...distribution company,” National Oilwell Chief Executive Pete Miller said in a statement.

Iberia Capital Partners analyst Trey Stolz said the distribution business would have more flexibility on its own.

About 85 percent of National Oilwell’s distribution and transmission unit revenue came from the distribution business in the six months ended June 30. The unit accounted for a fifth of the company’s overall revenue of $20.04 billion in 2012.

Under its distribution business, the company provides maintenance, repair and operating supplies to the energy and industrial markets. The transmission business sells products for water pipeline and wind tower construction.

National Oilwell’s rig technology business helps prepare oil and gas wells for production. The company also sells pipes and other products used for drilling through its petroleum services and supplies unit.

The spin-off, expected to be completed in the first half of 2014, did not require shareholder approval, the company said.

Credit Suisse Securities (USA) LLC is acting as the financial adviser to the company and Locke Lord LLP is its legal adviser.

National Oilwell shares were up 21 cents at $78.71 on the New York Stock Exchange on Tuesday morning.

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