Oil and Gas services provider, National Oilwell Varco Inc. has announced that it would acquire Grant Prideco Inc., drilling-products maker for USD 7 billion.

The takeover creates a leader in the production of equipment used to build drilling rigs and the pipes used in oil and gas wells, a business expected to post strong growth on the back of oil prices that have hovered near $90 per barrel.

Pete Miller, Chairman, President and CEO of National Oilwell Varco, said,“We are delighted with the way this transaction advances our strategic goal of providing more products and services to our customers. We believe that Grant Prideco’s product range will add new growing market segments to National Oilwell Varco and benefit our customers’ needs worldwide.”

Michael McShane, Chairman, President and CEO of Grant Prideco, Inc., said, “This is a great transaction for our shareholders in which they realize a significant premium and have the opportunity to participate in a larger, more diverse company.”

Under the agreement, National Oilwell will buy Grant Prideco for a combination of cash and stock valued at $58 per share.  The company will finance the cash portion of the transaction through a combination of cash on hand and debt, for which bank commitments have been secured.

According to the press release, the transaction is “expected to be accretive to earnings and cash flow per share for National Oilwell Varco in 2008, on a pro forma full-year basis and assuming a full year rate of estimated consolidation cost savings of $40 million.”