British based Acergy and Norwegian Subsea 7 announce Monday that the two deep sea oil and gas contractor companies have reached a merger agreement. It’s the third time the managements have tried to come up with a deal. This time they’ve succeeded – with a little help from Citigroup, Deutche Bank and Rothschild.
“The Board of Directors of both companies have unanimously agreed to recommend the combination to their respective shareholders.”
The new company – Subsea 7 – will become a global organization with a total of 12.000 employees and a market value of USD 5,4 billion. The merging of the two oil explorers will enhance their local presence in all major offshore oil and gas regions.
After two earlier failed attempt to merge Acergy and Subsea 7, today’s announcement comes as a surprise to most market participants.
“I am very surprised that this happens now. It’s a deal we have been waiting for a long time, but then Subsea 7 began to sell its shares in Acergy in first quarter of this year and most of us, me included, thought then this was a dead deal. In light of this, it’s very surprising, “ says analyst Frederik Lunde at Carnegie to the website DN.no.
“But it is absolutely necessary, and a proper way to go,” the Norwegian analyst adds.
Also analyst Endre Strorløkken at Danske Bank is surprised by today’s announcement.
“If they merge they get a company that has a greater global scope and a better balanced portfolio from a global perspective. This may make them more attractive to the big oil companies; they will be able to relate to one company, rather than Acergy in one region and Subsea 7 in another,” Storløkken says.
According to the presentation material, Citigroup, Deutche Bank and DnB NOR have been acting as financial advisers to Subsea 7, and Rothschild have been Acergy’s financial adviser.
Billion Dollar Baby
Chairman of the Board at Subsea 7, Kristian Siem, will also be Chairman of the Board in the new company, while Acergy’s CEO Jean Cahuzac keeps his position as CEO of the combined Acergy/Subsea 7.
According to Kristian Siem, the pure size of the new company is the most important argument for the merger.
“The most important thing is that our industry has evolved. Our customers have grown larger, and the jobs we offer is now far bigger than they used to be. Through this merger we will be prepared to take larger jobs with greater resources, and we will get better harmony between the work and the size of our market size. I remind you that we offer contracts in the the billion-dollar-class. When we have a market capitalization of just a couple of billions, it is bad harmony,” Siem points out to the Norwegian news agency TDN Finans.
Here’s some of the highlights, presented to investors Monday morning.
A global leader in seabed-to-surface engineering and construction:
* A market value of $5.41 billion and a global organization of 12,000 people
* The capability and resources to address the worldwide growth in size and complexity of subsea projects
* Enhanced local presence in all major offshore oil and gas regions
* Expected annual synergies of at least $100 million
Complementary businesses able to deliver a step-change in service for clients:
* Full spectrum of subsea services – SURF, Conventional and Life-of-Field
* High-end diversified fleet of 43 vessels
* Extensive fabrication and onshore facilities
* Greater depth of project management, engineering and technical expertise
* Access to high value technologies
There will be a 30 minute conference call at 2 pm UK time. Details to be found in the presentation material, linked below.
Subsea 7 Inc. is listed only in Oslo, under the ticker SUB.
Here’s the markets reaction, so far:
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