The Board of Directors of two Norwegian oil service companies, Acergy S.A. (ACGY) and Subsea 7 Inc., announced their decision to merge to build a leader in undersea engineering and construction for the oil and gas industry.
The market value of the merged company is expected to be approximately $5.4 billion based upon closing prices for each company’s ordinary shares, as of June 18, 2010, with Acergy holding 54% ownership of the new entity and Subsea 7 controlling the remaining 46%.
As per the agreement, each Subsea 7 shareholder will receive 1.065 Acergy shares for every Subsea 7 share held. Acergy will issue about 156.8 million shares to Subsea 7’s shareholders with the latter being valued at 15.8 billion kronor, or $2.5 billion, a premium of 3% to Friday’s closing prices.
The new entity, retaining the name of Subsea 7, will have a combined backlog of $5.3 billion ($2.7 billion of Acergy and $2.6 billion of Subsea 7) and a workforce of 12,000 employees with an anticipated annual synergy of at least $100 million. Subsea 7’s current Chairman, Kristian Siem, will head the combined entity along with eight other Board members.
The deal is expected to be completed in late 2010 or in early 2011, subject to both the companies’ shareholder approvals, regulatory approvals and certain other customary closing conditions.
The newly-merged company will be listed in Norway and the United States. It will be adequately equipped with a strong balance sheet, efficient supply chain management and a well-diversified fleet capable of tackling the increasing size and technological complexity of subsea projects. The combined entity will also reap the benefits of a wide geographical presence as Acergy is strongest in West Africa and Asia, where Subsea 7 has only a limited presence, but it enjoys a domineering presence in the North Sea and Brazil.
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