National Oilwell Varco 2010 Annual Report Download - page 78

3. Grant Prideco Merger
Pursuant to the Agreement and Plan of Merger with Grant Prideco, Inc. (Grant Prideco) (the Merger), a Delaware Corporation, effective
December 16, 2007 (the Agreement Date), the Company issued .4498 shares of National Oilwell Varco, Inc. common stock and $23.20 in
cash (the Exchange Ratio) for each Grant Prideco common share outstanding on April 21, 2008 (the Merger Date) totaling approximately
57 million shares and $2.9 billion in cash. The Company has included the financial results of Grant Prideco in its Consolidated Financial
Statements beginning on the Merger Date, the date Grant Prideco common shares were exchanged for National Oilwell Varco common shares
and cash. The Grant Prideco operations are included in the Petroleum Services & Supplies segment.
Prior to its acquisition, Grant Prideco was a world leader in drill stem technology development and drill pipe manufacturing, sales and service
and a global leader in drill bit and specialty tools, manufacturing, sales and service. The Company believes the Merger with Grant Prideco
advanced its strategic goal of providing more products and services to its customers and that Grant Pridecos product range added new growth
opportunities to the Company and benefited its customers needs worldwide.
The Merger was accounted for as a purchase business combination. Assets acquired and liabilities assumed were recorded at their fair values as
of April 21, 2008. The fair value of shares issued was determined using an average price of $72.74, which represents the average closing price of
the Companys common stock for a five-day period beginning two available trading days before the public announcement of the transaction. The
total purchase price was $7,199 million, including Grant Prideco stock options assumed and acquisition related transaction costs and is comprised
of (in millions):
Shares issued totaled approximately 57 million shares at $72.74 per share $ 4,135
Cash paid at $23.20 per share 2,932
Grant Prideco stock options assumed 56
Merger related transaction costs 76
Total purchase price $ 7,199
For all Grant Prideco stock options and restricted stock granted prior to 2008, vesting was accelerated under the terms of the stock option and
restricted stock agreements; therefore, there was no modification of the awards as defined under SFAS 123(R). For stock options and restricted
stock granted by Grant Prideco in 2008, 320,500 Grant Prideco stock options and 388,000 shares of restricted stock were replaced with 250,402
National Oilwell Varco stock options and 303,212 shares of National Oilwell Varco restricted stock, respectively. For the 2008 Grant Prideco
grants, vesting was not accelerated in connection with the Merger, under the terms of the stock option and restricted stock agreements, except for
certain recipients of the 2008 Grant Prideco restricted stock grant.
Merger related costs of $76 million include severance and other external costs directly related to the Merger.
Transaction costs of $11 million for the year ending December 31, 2008 were comprised of $6 million for accelerated vesting of stock-based
compensation, $4 million for bridge loan fees and $1 million of other costs and are included in selling, general and administrative expense in the
Consolidated Statements of Income. 75