Adds background on companies from paragraph nine
Technip and FMC Technologies have announced plans to merge the oil field service companies into a new firm Technip-FMC, with an equity value of $13bn based on pre-announcement share prices.
The Houston and Paris-based companies said the merger will create a leader in subsea, surface, onshore and offshore technology. The announcement comes just days after US service companies Halliburon and Baker Hughes called off their $35bn merger plan following stiff regulatory challenges, ending a deal that would have combined the world's second and third largest oilfield services companies. The US Justice Department on 6 April said it was taking legal action to block that takeover, on the grounds that it would eliminate competition and raise prices.
FMC and Technip said the all-share transaction will create a company that can deliver pre-tax synergies of $400mn/yr in 2019. The new company will be listed in New York and Paris. It will have five business units: surface, subsea products, subsea projects, onshore, and offshore, with some headquartered in Paris and some in Houston.
As separate entities, the two companies have operations in 45 countries and combined revenue of $20bn and combined earnings before interest, tax, depreciation and amortisation of $2.4bn.
The companies already have a joint venture Forys Subsea.
The new company's chief executive will be Doug Pferdehirt, currently FMC chief operating officer. Technip chief executive Thierry Pilenko will act as executive chairman.
No expected completion date has yet been given.
Technip abandoned attempts to acquire seismic data specialist CGG in late 2014, after having a preliminary €1.47bn ($1.83bn) takeover offer rebuffed.
The French company is the larger of the two partners, with first-quarter revenues of €2.8bn ($3.1bn), against $1.4bn for FMC in the last quarter of 2015. Where Technip's revenues had fallen by 4.2pc on the year, FMC's had tumbled by 36pc, in an environment of lower oil prices. Technip chief Pilenko summed up the outlook at the end of the first quarter: "Our views on the market outlook are unchanged compared to mid-February. With a low and volatile oil price and their cashflows under pressure, our clients are more than ever focused on cutting their capex and costs to substantially below 2014 levels. Project awards are therefore being postponed and even cancelled, putting visible strain on some parts of our industry. Overall, we are seeing continued interest worldwide in investing, revamping and upgrading downstream, but upstream — even if we may see momentum on a few strategic developments — will be less resilient, with front-end work only gaining momentum from late 2016 into 2017." But the French firm managed to increase profits albeit under the shadow of a declining order book.
Both companies are geographically diversified in their operations. Europe, Russia and Central Asia account for more than one third of Technip's revenues, but Africa, Asia-Pacific and the Americas all account for sizeable chunks. The Middle East accounted for under 10pc of revenues in the first quarter.
Subseas technology accounted for some 70pc of FMC revenues last year. It has production facilities in 29 countries and service bases in 18. By revenue, North America and Africa each account for around one quarter with the rest even divided between Europe, Asia-Pacific and Latin America.
