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Large-cap oilfield services company National Oilwell Varco Inc. (NOV - Analyst Report) has agreed to acquire smaller rival Robbins & Myers Inc. for about $2.5 billion in cash.

The transaction has been approved by the boards of both Houston-based companies but awaits regulatory and shareholder approval. In particular, the deal needs the go-ahead of at least two-thirds of Robbins & Myers shareholders. We expect the buyout to conclude during the fourth quarter of 2012.   

M.H.M. & Company – Robbins & Myers’ largest shareholder that controls about 10% of the shares – have agreed to vote in favor of the transaction.

As per the deal, Robbins & Myers shareholders would get $60 in cash for each share they hold. At Robbins & Myers’ Wednesday closing stock price of $46.80 on the New York Stock Exchange, the deal values the company’s shares at a 28% premium.

Robbins & Myers specializes in the manufacture of critical well drilling equipment parts – including valve controls and grinders – to manage the flow of oil and gas in drilling operations. 

The acquisition – National Oilwell Varco’s largest in more than four years – will allow the energy equipment contractor to broaden scale and scope of the solutions that it offers to oil and gas customers worldwide. Post merger, National Oilwell Varco expects Robbins & Myers’ complementary products to benefit its product line of well tools, pumps and valves.

In particular, the move will help National Oilwell Varco to strengthen its position as a supplier of blowout preventer (a critical safety machine that can shut a well off in case of an emergency), as Robbins & Myers is the fourth-largest maker of such devices.

National Oilwell Varco, which ranks ahead of Cameron International Corp. (CAM - Analyst Report) as the biggest U.S. maker of oilfield equipment, is currently a Zacks #3 Rank (Hold) stock, implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months. We are also maintaining our long-term Neutral recommendation on the stock.

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