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Acergy buys Subsea 7 for $2.5 billion

Acergy SA, a U.K. provider of oil services, agreed to buy Subsea 7 Inc. for about 15.8 billion kroner ($2.5 billion) in shares to create a “global leader” in seabed engineering and construction.

Acergy agreed to pay 1.065 shares, or 107.1 kroner based on June 18’s closing price, for every Subsea stock, a 3 percent premium, the companies said today. The combination is based on a ratio of 54 percent to Acergy and 46 percent to Subsea 7 owners.

“This is the third round of talks we’ve had, after the first two collapsed for various reasons,” Subsea 7 Chairman Kristian Siem said in an interview in Oslo. “We reinitiated the process a few months ago and finally reached an agreement yesterday.”

The companies agreed to combine as governments around the world are re-examining deepwater exploration regulations after the BP Plc Gulf of Mexico oil spill. Oil service companies and rig operators have also been combining after rental rates declined because of the global recession.

“It will probably be very well received by the market as it creates a much bigger, more diversified company, which is important following the accident in the U.S. for instance,” said Frederik Lunde, an analyst at Carnegie ASA who rates both companies “outperform.” “It’s very easy to make a case for major synergies here, both with regards to costs and the fleet usage is likely to gain.”

Acergy shares jumped 9.6% to 110.3 kroner and Subsea rose 9% to 113.3 kroner in Oslo. At today’s closing price, the transaction values Subsea at 17.4 billion kroner.

The companies expect annual synergies of “at least” $100 million and the combined entity will have an orders backlog of $5.3 billion, 12,000 employees and a fleet of 43 vessels. The deal is expected to close at the end of this year or in the first quarter 2011.

“We’ve all the time felt that this is an industrial development that is right, most notably due to the fact that our clients have become bigger through mergers,” Siem said. “They go into deepwater projects and the result is that subsea field developments become big contracts in the billion dollar category and if you’re a small company there’s a disconnect between the size of the contracts and the size of our company.”

Acergy said in April it was examining opportunities to expand operations in the Gulf of Mexico, Australia, West Africa and Brazil. Subsea, with more than 5,000 employees, operates in Africa, Asia Pacific, Brazil, North American and the North Sea.

The company will be called Subsea 7 and headed by Acergy Chief Executive Officer Jean Cahuzac with Siem as chairman. Mel Fitzgerald, the CEO of Subsea who is nearing retirement, will serve as a consultant after the merger and sit on the board of the new company, Siem said.

“This combination is an exciting opportunity for our shareholders, our clients and our people,” Acergy Chairman Peter Mason said in the statement. “The combined entity will have a stronger balance sheet, enabling efficiencies of scale and capital deployment.”

The board of both companies unanimously agreed to recommend the merger to their shareholders.

Citigroup Inc., Deutsche Bank AG and DnB NOR ASA acted as advisers to Subsea.

06/21/2010

 

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