Smith International Would Net $41 Million From Subsidiary Sale

Smith International Inc. said Thursday that it has tentatively agreed to sell its McEvoy-Willis petroleum equipment subsidiary and will use the expected $41-million proceeds to increase the cash portion of its payments to creditors under its recently unveiled bankruptcy reorganization proposal.

The agreement with Cameron Iron Works Inc. of Houston calls for Smith to receive $51 million in cash immediately upon closing the deal--which is expected to occur before the end of the year.

Despite the projected $41-million net proceeds from the transaction, Smith said the deal would cause a $33-million loss when it is completed because the sale price is lower than the subsidiary’s book value.

Smith officials said the proposed deal is the latest of several recent subsidiary sales that have reduced the Newport Beach-based company, which at the peak of the petroleum industry’s fortunes in 1981 had 14,000 employees and sales of $1.2 billion, to about 3,100 employees and sales of about $300 million.

The sale of McEvoy-Willis, which had sales last year of about $91 million, will mean the loss of 700 more workers worldwide, but none in Orange County.

Loren Carroll, Smith’s chief financial officer, said McEvoy-Willis is the last subsidiary sale Smith officials have scheduled.

The deal still requires approval of the boards of directors of both Smith and Cameron and of the U.S. Bankruptcy Court in Los Angeles, which has been overseeing Smith’s bankruptcy operations for the last 16 months.

Smith sought refuge in bankruptcy reorganization in February, 1986, after being hit with a $205-million patent-infringement penalty after losing a protracted lawsuit to Hughes Tool Co., now known as Baker Hughes. As part of the bankruptcy reorganization, Smith has agreed to pay Baker Hughes $95 million.

Carroll said the company had been trying to sell McEvoy-Willis for several months as part of its overall effort to trim the company back to its core business of supplying equipment for underground oil and gas drilling. McEvoy-Willis supplies equipment used above ground at the head of a well. Earlier this year, Smith sold its Tungsten Carbide Manufacturing division.

Smith said all $41-million profit on the McEvoy-Willis sale would be used to increase the cash portion of the company’s $415.5-million bankruptcy settlement package.

Under the original terms of the settlement package released Monday, the company planned to repay creditors with a combination of $146 million in cash, $155 million in long-term notes, and up to $115.5 million of new stock and warrants.

As a result of the additional cash, Smith said it would now need just $145 million in long-term notes and $84.5 million in new stock and warrants.