Saipem, Subsea 7 considering an oilfield services merger

Ed Hammond, Daniele Lepido and Dinesh Nair 11/15/2019

NEW YORK (Bloomberg) - Saipem is considering a combination with rival Subsea 7 to create a larger European oil services provider, people with knowledge of the matter said.

The Italian company is pursuing a potential deal with Norway-listed Subsea 7 as it seeks to bulk up and weather an industry downturn, according to the people, who asked not to be identified because the information is private. Subsea 7 rose as much as 8.4% in Oslo trading, the biggest intraday gain in more than two years, and has a market value of about $3.3 billion. Saipem gained as much as 5.3%.

Saipem, whose biggest shareholder is Italian energy giant Eni SpA, is valued at about $4.9 billion. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction, according to the people.

A tie-up by the companies would be among the biggest oil services deals ever in Europe.

This year, Eni and OMV AG acquired a $5.8 billion stake in Abu Dhabi National Oil Co.’s refining unit, the data show. Since 2000, Eni has racked up 10 acquisitions topping $1 billion.

Previous Talks. Saipem and Subsea 7 have held talks about a merger in previous years, though they failed to reach an agreement, the people said.

Representatives for Saipem, Subsea 7 and Eni declined to comment.

Oil services providers, which supply energy explorers and producers with equipment and expertise, have been hit hard by the drop in crude prices, as their clients have cut spending on everything from drilling rigs to support platforms. The price of Brent crude has fallen about 28% from a five-year peak in October 2018.

Companies in the sector have been seeking to bulk up in order to cut costs, diversify and become more competitive.

Subsea 7 Deals. Subsea 7, led by Chairman Kristian Siem, made a failed attempt last year to take over McDermott International Inc. for $2 billion. Since then Subsea 7 has made some smaller acquisitions in its effort to expand through dealmaking, buying technology provider 4Subsea in October for an undisclosed sum.

General Electric Co. merged its oilfield-services arm with Baker Hughes Co. in 2017. John Wood Group Plc acquired Amec Foster Wheeler Plc for almost $3 billion in stock the same year.

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