$SLB

SLB to Strengthen Data Center Business with $4.1 Billion Acquisition of Kelvion From Apollo

SLB (SLB) agreed to acquire cooling equipment maker Kelvion from Apollo Global Management (APO) in a deal worth $4.1 billion, including debt, as it looked to boost its data center solutions business.SLB, formerly known as Schlumberger, will purchase Kelvion for about $3.4 billion in cash, the companies said in separate statements Monday. The oilfield services company will also take over roughly $700 million in debt, along with a minority interest held by funds advised by Triton.Shares of SLB rose 1.9% intraday Monday, while Apollo added 1.4%."Kelvion advances our path toward more integrated data center infrastructure solutions, expands our addressable market - more than doubling our revenue opportunity per gigawatt of delivered capacity - and allows us to scale both our offerings and the global reach of the business," SLB Chief Executive Olivier Le Peuch said.Kelvion provides thermal management and heat exchange technologies to the data center market, its largest end market, as well as the energy and industrial segments. Kelvion's data center revenue is expected to reach $1.2 billion to $1.3 billion in 2026, SLB said.SLB expects to record more than $2 billion in combined data center revenue this year and $4.5 billion to $5 billion in 2028. SLB forecasts its data center solutions business' cumulative delivered capacity to exceed 2 gigawatts by the end of the year.Last month, SLB reported second-quarter revenue of $8.97 billion, up 5% on a yearly basis. In an emailed client note at the time, Morgan Stanley said growth in the company's data center solutions business was accelerating, while the division's model remained "relatively capital-light."The Kelvion deal, which requires approval from regulators, is expected to complete in the first half of next year, SLB and Apollo said Monday.SLB estimates the acquisition to be accretive to its earnings and free cash flow, both on a per-share basis, in the first 12 months after completion. The company forecasts delivering around $120 million in annual earnings before interest, taxes, depreciation and amortization synergies within three years."We believe long-term growth will accelerate as part of SLB, a global leader in energy services that's applying its expertise to data center development around the world," Apollo Partner Waleed Elgohary said.Earlier this year, SLB agreed to acquire Tachyus, a reservoir modeling and optimization software company, and S&P Global Energy's geoscience and petroleum engineering software portfolio.Price: $58.59, Change: $+1.26, Percent Change: +2.20%