By Francesca Landini and Nerijus Adomaitis
MILAN/OSLO (Reuters) -Italy’s Saipem has agreed to merge with Norwegian rival Subsea 7 in an all-share deal to create a leading global player in offshore energy services.
The combined group, to be renamed Saipem7, will have an order backlog of 43 billion euros ($45 billion), revenue of about 20 billion euros, and core earnings of more than 2 billion euros, the two companies announced late on Sunday.
Saipem’s shares opened up more than 5% on Monday before reversing to fall more than 4% while Subsea 7 was up 3.2% as of 1324 GMT.
Analysts during a call with the two groups’ top teams cited concerns about antitrust risks, a long schedule for completing the merger, and the payment of a special dividend to Subsea 7 investors.
Saipem and Subsea 7 executives said the planned merger would combine complementary businesses across oil service segments and geographies.
“It will allow our clients to have one global oil service provider that could offer everything from ultra-shallow water to ultra-deep water,” Subsea 7 CEO John Evans said on a call with analysts on Monday.
The new company will be the largest in terms of its fleet of offshore construction vessels, both for oil and gas, and wind power projects, Matthew Hale at Oslo-based consultancy Rystad Energy said in an email to Reuters.
The proposed merger follows a trend of increased consolidation within the oil and gas supply chain as oil companies look to bring down costs and lead times for large offshore projects, he added.
Saipem has restructured since requiring a capital injection in 2022. Its clients include several national energy companies including Saudi Aramco, QatarEnergy and Abu Dhabi’s ADNOC. Subsea 7’s customer base is more focused on international oil firms such as BP and Equinor.
Saipem CEO Alessandro Puliti downplayed concerns about regulatory approvals.
He said the combined group would have about 20% market share in the Middle East and Latin America, and some 22% in the North Sea, based on revenue.
“Those are percentages that should not worry the authorities,” Puliti said.
While the two mainly operate in different regions, they compete for contracts in Brazil, a growing offshore oil and gas market.
The two partners aim to reach a binding merger agreement by mid-2025 with completion expected in the second half of 2026. Saipem’s Puliti will lead the combined Italy-headquarted business, which will be listed both in Milan and Oslo, while Subsea7’s Evans is expected to lead its offshore operations.
SPECIAL DIVIDEND
Their shareholders will each own 50% of the combined company’s share capital.
Siem Industries, controlled by Norwegian billionaire Kristian Siem, would have a stake of about 11.9%, while Italian energy group Eni and state investor Cassa Depositi e Prestiti would own about 10.6% and 6.4%, respectively.
Subsea7 shareholders will receive 6.688 Saipem shares for each share they hold, the companies said in a statement.
Subsea7 will also pay an extraordinary dividend of 450 million euros just before closing the deal.
“The combined business will create cost savings and a strengthened, integrated offering, particularly in offshore,” Citi analysts said in a note for clients, adding the merger could boost 2025 and 2026 payouts for shareholders.
The firms expect to generate annual benefits of around 300 million euros from the third year after completion, mainly through cost savings.
At the beginning of 2022 Saipem was hit by cost overruns at some large projects and had to carry over a life-saving capital increase with the help of Eni and CDP to shore up its balance sheet.
Subsea 7 and Saipem held talks over a possible tie-up several years ago, but failed to reach an agreement. The latest talks lasted for a few months, Evans told a call with analysts.
($1 = 0.9547 euros)
(Reporting by Francesca Landini in Milan and Nerijus Adomaitis in Oslo; editing by Valentina Za, Jason Neely and Susan Fenton)
