Italy's Saipem and Norway's Subsea 7, to create a leader in energy services

Saipem, an Italian company, has agreed to merge its Norwegian competitor Subsea 7 into a global leader in offshore energy services. The deal is a 100% share transaction.

The two companies announced that the combined group will be called Saipem7. It will have a backlog of orders of over 45 billion euros, revenue of around 20 billion and core earnings exceeding 2 billion.

Saipem shares rose more than 5% before falling more than 4.2%. Subsea 7's stock was up 3.2% at 1324 GMT.

Analysts raised concerns during a conference call with top management of the two companies about the antitrust risks and the long timeline for the completion of the merger. They also expressed concern over the payment to Subsea 7 shareholders of a special Dividend.

Executives from Saipem said that the merger between Subsea 7 and Saipem would bring together complementary businesses in oil service segments across different geographies.

Subsea 7's CEO John Evans told analysts in a Monday call that the company would be able to offer services from ultra-shallow to ultra-deep waters.

Saipem has a number of national energy companies as clients, including Saudi Aramco and Abu Dhabi ADNOC. Subsea 7 is more focused on international oil companies such as BP, Equinor and others.

Bernstein analysts said that the combined company will be "an unmatched global leader" when it comes to providing engineering and installation of complex subsea systems for oil and gas, as well as services in the offshore wind industry.

Alessandro Puliti, CEO of Saipem, said that the combined group will have a 20% market share in Latin America and the Middle East, and 22% in North Sea.

He added that "these are percentages which should not concern the authorities" in response to a question regarding the risk of antitrust approval hurdles.

Although they operate in different areas, the two companies compete in Brazil for contracts, which is a market that is growing in offshore oil and natural gas.

The two partners hope to have a merger agreement in place by the middle of 2025, with the completion date expected for second half of 2026.

DIVIDEND SPECIAL

Each shareholder will own 50% of their combined share capital.

Siem Industries, owned by billionaire Kristian Siem of Norway, would hold a stake in the region of 11.9%. Italian energy company Eni, and state investor Cassa Depositi e Prestiti, would each own approximately 10.6% and 6.4%.

In a joint statement, Subsea7 said that shareholders would receive 6.688 Saipem share for every share they own.

Subsea7 also pays an extraordinary dividend amounting to 450 million Euros just before the closing of the deal.

Citi analysts wrote in a client note that the combined company would create cost savings, a stronger, more integrated offering in particular offshore, and could increase payouts to shareholders in 2025 and 2026.

The companies expect to reap annual savings of up to 300 million Euros in the third year following completion. This is mainly due to cost-savings, thanks to fleet optimization, unified purchasing, sales and marketing.

Subsea7 CEO Evans will be expected to head its offshore operations. Puliti, the CEO of Saipem, will continue to run the combined company.

Subsea 7 held discussions with Saipem about a possible merger several years ago but were unable to come to an agreement.

(source: Reuters)