Baker Agrees to Terms for Acquiring Develco Inc.

Baker International Corp., on the heels of proposing a $1.2-billion merger with Hughes Tool Co., said Friday that it has agreed to acquire Develco Inc., a small, high-tech manufacturing firm in San Jose.

Although Baker officials would not disclose the terms of the sale, a source close to the Orange-based oil service firm said the deal is for about $10 million in stock and cash.

According to Baker, Develco, with about $9 million in annual revenue, is the largest manufacturer of electronic sensing devices used to guide drill bits during drilling.

A Wall Street source said the acquisition will give Baker “a leg up” in one of the most competitive segments of the oil service business and one that is “on the cutting edge of technology.”

Baker President James D. Woods said Friday that, in addition to the Develco acquisition, Baker is considering purchases of several other small oil service firms that will complement its business. When Woods announced the merger with Hughes Tool Co. last month, he said he anticipated further consolidations in the oil industry, as some companies that are unable to survive losses from collapsing oil prices are absorbed by stronger firms. Wood said he hopes that acquisitions will help Baker increase its market share and improve its financial picture. For the first nine months of the current fiscal year Baker lost $250 million, mostly reflecting large write-downs.

Woods said Friday that the Develco acquisition will “fill out our product lines on the electronic side of the business” and “probably puts us a step ahead in technology.”

Following the acquisition, Baker said it will finance increased research and development at Develco that will enhance the technology of Baker’s other companies.

The sale is expected to close Dec. 31, Woods said, pending approval of a final sale agreement by the boards of directors of both companies.