Emerson bags Roxar

Upstream software house-cum oilfield metering specialist bought by process behemoth in a $179 million deal. A new contender for Schlumberger and Halliburton in the digital oilfield?

Stavanger, Norway-based Roxar’s board of directors has unanimously recommended that shareholders accept an offer for the company made this month by Emerson’s wholly owned Norwegian unit Aegir Norge Holding. The Roxar board opined that the deal will make Emerson a leader in topside and subsea instrumentation and strengthen Emerson’s position in decision support software and upstream data acquisition. The offer price represents a 49% premium on the February 27 closing price. If the deal completes, Emerson is to redeem NOK 1.5 billion ($212 million) of Roxar debt.

The deal already has acceptance from 41% percent of Roxar’s shareholders. The acquisition will be financed by Emerson through existing cash balances and is not subject to any financing condition. The voluntary offer is expected to close in April 2009.

Roxar has two distinct lines of business, as a supplier of measurement technologies—especially high-end multi-phase flow meters and also a provider of upstream software, notably with its flagship Irap-Reservoir Modeling System (RMS). If the deal goes ahead, Roxar will become part of Emerson Process Management (EPM).

EPM executive VP Steven Sonnenberg said, ‘With its position in offshore metering and monitoring equipment and well optimization software, Roxar is a strong complement to Emerson. Our oil and gas customers will benefit from the more complete product and service offering that will result from this strategic combination.’

Two companies who are likely to do well from the deal are FMC Technologies and Kongsberg which acquired 25 and 28 million of Roxar’s shares respectively last November. Both currently hold about 10% of the company.

Comment—The ‘digital oilfield’ lies at the intersection of upstream engineering and process control. When we interviewed Roxar’s erstwhile president and CEO Sandy Esslemont back in 2004 he said, ‘We are a product company, not a service company like Schlumberger.’

Well this will change if Roxar, with 2008 revenues of $193 million becomes part of Emerson with fiscal 2008 sales of $24.8 billion!

We asked Emerson what it was planning for Roxar’s software division but it declined to add to its public statements. It could be that Emerson is simply buying Roxar for its metering business (73% of 2008 revenues).

But if, as the press release seems to imply, Emerson is planning to integrate RMS with its PlantWeb platform, then we may be witnessing the birth of a third major contender in the upstream service sector as the ‘digital plant’ meets the ‘digital oilfield.’ Delivering on this kind of a vision will likely require a few more acquisitions!

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