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Oil Services Merger Will “Save Half A Billion Dollars Per Year”

Oil Services Merger Will “Save Half A Billion Dollars Per Year”

Technip S.A, a French construction, engineering and project management firm in the energy sector looks certain to team up with American competitor FMC Technologies to make an oil services entity with a $25 billion combined revenue.

Paris, France, July 01, 2016 — FMC said in a statement yesterday that the all-stock transaction could save the two companies “nearly half a billion dollars a year” starting in 2018.

Thierry Pilenko, Technip CEO said “The two sides know each other very well, and we will be able to work together in many areas such as development of new technology, purchasing and future acquisitions.

The new entity, TechnipFMC, will make a consolidated stride in the Onshore/Offshore area as well as Subsea. “The deal will simply enable more rapid growth into the energy field,” Pilenko added.

The recent oil supply glut that has been holding up further global oil exploration and production projects is a direct response to decreased crude prices. Naturally, this results in a greater need for companies to consolidate their position in order to drive profit margins for shareholders.

Preliminary talks between the two companies were reported in the press late last year. It was revealed that the deal would involve a one-for-one share exchange for FMC and a one-for-two exchange for Technip. The overall share in the new company would be equally split between the two sets of shareholders.

“The deal seems to have been reached fairly amicably,” said Steve Rogers, Director of Asset Allocation at Orix Capital Trading in an email to clients, “There is some good parity in the merger proposition and the share exchange numbers reflect the current performance of the two companies.”

Expected to be completed at the start of next year, the new company will be headed by the current FMC President Doug Pferdehirt while Pilenko will be executive chairman.

Following the significant downturn in the exploration sector due to sagging oil prices, the two companies had previously joined forces to create Forsys Subsea which would perform subsea oilfield projects for both firms.

The two have very similar market values although Technip has double the annual revenue of FMC, approximately $13.7 billion.

Reuters reported recently that the proposed merger advisors for Technip would be Goldman Sachs while Evercore and Societe Generale would handle FMC’s side.

Ichiro Hoshi
Orix Capital Trading
Tokyo, Japan

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