Calgary-based CE Franklin Ltd. has entered into a non-binding letter of intent with Smith International, Inc., to acquire all of the common stock of Wilson International, Inc., a wholly owned subsidiary of Smith, in exchange for common shares of CE Franklin issued from treasury. CE Franklin will issue shares based on the June 30, 2004, balance sheet of Wilson, which is not yet finalized, and is estimated to be between $245 million and $250 million (U.S.).

Wilson, headquartered in Houston, is a leading distributor of PVF and mill, safety and other maintenance products to energy and industrial markets in the United States. Wilson generated sales of $730.4 million in 2003. If combined, sales of CE Franklin and Wilson would approach $1 billion.

CE Franklin and Wilson have been successful in joint marketing initiatives in the past, most recently winning a major North America maintenance, repair and operating supply agreement with a North American exploration and production company that is expected to generate annual revenue of $20 million in Canada, and $15 million in the United States. “The combination of CE Franklin and Wilson create a company that will be well-positioned to pursue significant North America-wide and international supply arrangements going forward,” said Michael West, president and CEO of CE Franklin, who will manage the combined entity.

A special committee of the independent members of the Board of Directors of CE Franklin has been formed to consider and make a recommendation to the Board of the transaction. The transaction is a related party transaction under Canadian securities law by virtue of Smith's current 55% shareholdings in CE Franklin. The special committee has retained CIBC World Markets as its financial advisor.

It is anticipated that Smith would own about 90% of the common shares of CE Franklin as a result of the transaction. Smith has advised CE Franklin that its intent is to reduce its ownership interest to the 55% level held today, the timing of which will be dependent on the market conditions and other factors.

The transaction is subject to negotiation of a definitive agreement, applicable regulatory approvals and to the approval of a majority of CE Franklin shareholders (excluding Smith) at a meeting to be held in September 2004.

CE Franklin distributes PVF and related products to the Canadian oil and gas industry. It has 37 branches across Canada.