Mergers and Acquisitions 700 words
jjacob1604
Example..docxDear Fellow Shareholder,
With the uncertainty revolving around the oil prices, the exploration and production
industry has tackled yet another challenging year. We have come across 2015 with a
plunge of 50% in the oil prices and have experienced a position unheard of in the past
three decades. With our strengths and beliefs in our capabilities after the disastrous
mishandling of our Gulf of Mexico oil spill, we have learned to face major
uncertainties, especially in an environment such as this one where unquantifiable and
unforeseeable volatility levels prevail. As a result, we have drawn together strategic
plans that allow us to gain our lost market competitiveness with a well-thought
acquisition of a 51% stake in the oilfield service provider, Schlumberger.
Schlumberger, being a market leader in the oil technology, project management and
information management domains, has been our choice for change and influence in
the industry. Thus, we offer a cash payment of $68.957B, inclusive of a 20%
premium of $11.49B, through the combination of debt financing and retained
earnings. We anticipate growth potential of 25% over the next five years based on our
belief that the existing value of Schlumberger in the current environment is
undervalued and is more than likely to grow as the entire situation in the industry
improves.
Therefore, there are three main reasons for this acquisition offer that we believe will
maximize shareholder returns and enhance our market positioning:
1. Schlumberger is a leading supplier offering solutions ranging across
different products and services from exploration, production, pore-topipeline and hydrocarbons recovery, optimising performance of
reservoirs. This will enable us to manage our entire operations process that
we majorly outsource to contractors. Moreover, this will allow enhanced
quality assurance, testing and overall satisfaction as a leader in the oilfield
services industry will be involved from start to finish. As a result,
safeguarding us from incurring any major operational mishap as observed
during the Gulf of Mexico oil spill, refinery explosions in Texas and pipeline
leaks in Alaska. This means quality checks will be high and chances of
accidents will be low. In the long run, this means that we will be saving on
capital expenditures when all our fines and debts have been cleared.
2. Schlumberger’s wide knowledge based assets and strong portfolio of
subsidiaries offer niche expertise in every important segment of BP’s
upstream and downstream operations. This is evident through all the
expertise offered through each acquisition and alliance formed by
Schlumberger, who specialise in different exploration and production
segments. Moreover, research capabilities demonstrated through registered
patents and prior collaboration agreements with us indicates their commitment
to enhancing their competitive advantage, which is perfectly aligned with our
personal mission. Furthermore, their wide-ranging geographical presence only
strengthens this perspective, as they have equally competitive markets and
services as us.
3. Market leadership in the oil and gas industry will allow Schlumberger to
exercise greater pricing power, and together with BP, enable market
dominance. With similar market capitalisation and market influence, the
acquisition will not be difficult as both entities hold strong market positions.
So, this acquisition will allow access to competitors internal requirements and
processes, which in turn cannot affect Schlumberger’s clients as they will have
no choice but to purchase its services because of technological advancement,
research expertise and market leadership overall. Thus, from a competition
standpoint, this is our opportunity to learn from better players, charge high
prices, earn high revenues and ultimately, beat them with our combined
expertise.
As a result, this deal is likely to yield several synergistic benefits in the long term as
the oil industry stabilises and overcomes existing challenges. This only means higher
shareholder returns for you, with increased dividend opportunities as profits increase.
From a strategy standpoint, this acquisition fits our medium term commitment of
capital allocation and deployment to simplify our business, while ensuring safety and
reliability across all our operations and business processes.
