France's Technip acquires US rival for $1.1bn

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France's Technip acquires US rival for $1.1bn  Empty France's Technip acquires US rival for $1.1bn

Post  Administrator on Tue Sep 13, 2011 10:21 am

Technip of France has beefed up its growing subsea pipeline business with the $1.1bn cash and debt purchase of Global Industries, a US rival, the latest in a flurry of deals in the oil and gas services sector.

The deal follows General Electric’s $1.3bn purchase of the UK’s Wellstream, one of Technip’s biggest rivals in providing flexible pipelines, which are used to connect oil and gas wells with floating or onshore installations.

The French company said it was paying $8 per share for Global, a 55 per cent premium to its closing price on Friday. The energy services sector has been boosted recently by high oil prices, the continuing push by energy companies into deeper waters and the use of more unconventional drilling techniques.

Analysts welcomed the deal, which would almost double the size of the Technip’s fleet of ships. The agreed offer, which includes $136m of net debt, is the biggest undertaken by Technip since its merger 10 years ago with Coflexip, a French pipeline specialist.

The deal underlines the increasing confidence of Technip, which has emerged in recent years as one of the biggest suppliers to oil and gas companies. In five years its shares have risen by 50 per cent, while Paris’s CAC 40 has fallen by a similar amount. On Monday, the shares fell 1 per cent to €64.54, giving it a €7.2bn ($9.8bn) market value. The US purchase strengthens Technip’s strategically important subsea division, which has higher profit margins than its offshore platform and onshore units. Thierry Pilenko, chief executive, said the company had won a glut of subsea orders from Brazil, the Gulf of Mexico, west Africa and the Asia Pacific region.

Technip believes that the shift towards complex exploration and production at ever-greater depths will lift demand for its products.

“The subsea market looks likely in 2011 to show a record amount of orders for our industry,” Mr Pilenko said. Analysts said the deal would allow Technip to “optimise” its cash position. The company had net cash of €1.1bn at the end of June.

There was also support for the strategic rationale behind the deal, particularly the addition of 14 ships from the US company, which can cost hundreds of millions of dollars to build. Technip currently operates 17 ships, which lay pipes and provide installation and support services.


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