National Oilwell Varco Inc., the oil-field equipment maker that has spent at least $1 billion a year on deals, expects acquisitions to continue as its newly minted chief executive reorganizes units and prepares a spinoff.
The manufacturer, whose three in-house dealmakers execute three to four acquisitions a quarter mostly in the range of $5 million to $20 million a piece, is winning one for every seven or eight it’s going after, Chief Executive Officer Clay Williams said in an interview. The remaining aren’t closed because sellers expect prices that can’t be worked out or a competitor such as General Electric Co. wins out, he said.
“Our M&A strategy has been sustained for many, many years,” Williams, who oversaw acquisitions at Varco Inc. before it was bought in 2004 by National Oilwell Inc. for $3 billion, said late yesterday during the Howard Weil Energy Conference in New Orleans. “We’re sticking to our knitting.”
Williams, who took over the top job at the largest U.S. maker of oil-field equipment sooner than expected last month, is increasing the number of financial reporting divisions to four from three. He replaced Pete Miller, who’ll remain as chairman of the Houston-based company until its distribution business is completely spun off. The plan to turn the unit into a stand-alone, publicly traded company was announced in September.
Over the next two years, the company may generate $2.8 billion in free cash that can be returned to shareholders through dividend increases or spent on deals, analysts from Raymond James & Associates Inc. including J. Marshall Adkins wrote in a Jan. 31 note to investors.
National Oilwell Varco’s largest deal was buying Grant Prideco Inc. in 2007 for about $7 billion in cash. The company, which has 25 buy ratings from analysts, 10 holds and one sell, makes oil-field gear ranging from blowout prevention equipment for offshore wells to complete land rigs.
“We put a lot of energy in smaller transactions,” he said. “There’s frequently terrific value in those businesses.”
The company has spent at least $1 billion on acquisitions in each of the past three years, according to company filings.