Offshore staff
HOUSTON – McDermott International has rejected Subsea 7’s offer to acquire all of the outstanding shares of McDermott common stock for $7/share.
The proposal was subject to completion of due diligence, the termination ofMcDermott’s business combination agreement with CB&I, and regulatory approvals.
McDermott’s board concluded the proposal was not in the company’s best interests and was not an attractive alternative to the proposed combination with CB&I.
BothMcDermott and CB&I have received all necessary regulatory approvals for their merger, which they aim to close next month. However, the combination remains subject to approval by McDermott’s and CB&I’s stockholders and other closing conditions.
Audun Martinsen, vice president of Oilfield Service Research at analyst Rystad Energy, said: “McDermott is the only acquisition target that could make Subsea 7 the market leader in the SURF sector.
“With this proposed acquisition, Subsea 7 is hoping to strengthen its offshore SURF and engineering capabilities, and it would propel the company beyond TechnipFMC and Saipem to assume the global throne in that segment.”
In the SURF market, Martinsen said, a merged Subsea 7-McDermott would have a combined market share of 24%, followed byTechnipFMC at 20% and Saipem at 15%.
In addition, Subsea 7 would acquire the US contractor’s fabrication and operations business which specializes in topsides and jacket structures, and which is currently busy withTotal’s Tyra Redevelopment project in the Danish North Sea.
The Middle East and Asia regions account for more than 90% of McDermott’s upstream revenues, while Subsea 7 has had more focus and success in the North Sea, Africa and the Americas, which collectively represent about 85% of its upstream revenues, Martinsen claimed.
“Subsea 7 does have presence in theMiddle East market with its acquisition of Emas Chiyoda’s subsea business, but that region still only represents less than 5% of its business. With the McDermott business, it would grow to 15% for the combined entity.”
A merger between Subsea 7 and McDermott could expect to achieve average annual market growth of 6% from 2017-2020, he added, much higher than the potential growth of 4% per annum likely from McDermott’s proposed merger with CB&I.
McDermott’s goal with this move was to diversify into the onshore EPCI business, and to establish a vertically integrated company.
“Oil prices have climbed considerably since December and, according to our analysis of oil market fundamentals, the offshore service market will see a clear comeback as the world will need moreoffshore production,” Martinsen added.
04/23/2018
