Snamprogetti is one of the leading engineering and construction companies, active in the international market for the design and execution of large scale onshore plants for the production and treatment of hydrocarbons and the monetization of natural gas.
Saipem is a leading company in the design and execution of large scale offshore projects for the production and transportation of hydrocarbons, and has distinctive construction capabilities for the realization of onshore projects.
As a consequence of the transaction, Saipem will have a position of primacy at the high end of the market for the provision of Engineering, Procurement, Project Management and Construction services for the Oil & Gas Industry, with a strong bias towards especially challenging activities in deepwater and remote areas; with significant technological competence such as gas monetization and heavy oil exploitation. The new Group will operate globally but with a strong local presence in the most strategic regions of West Africa, Middle East, Central Asia, and South East Asia.
The business portfolio of the new Group allows a superior balance between capital intensive (offshore) and less capital intensive (onshore) activities, along with increased resilience thanks to the intrinsically complementary nature of Upstream and Downstream business cycles.
The range and nature of the clients' profile of the new Group is broader and deeper, serving both the largest international oil companies that are the traditional clients of Saipem, and the national oil companies with whom Snamprogetti generally contracts.
The integration of Saipem and Snamprogetti will be uniquely facilitated by the strong industrial relationships developed on many common endeavors, by a natural affinity and culture deriving from common roots within the Eni Group, and the sharing of the same information systems.
The capabilities of the two companies are both highly complementary and strongly synergistic: the amplification of the technological content and engineering & project management competence will facilitate new business, while the group-wide exploitation of the ability to operate in the toughest environments will increase efficiency.
As of December 2005, Snamprogetti's backlog was around €4,400m. Revenues for 2006 are expected to be around €2,800m, operating income before G&A around €90m, and net income around €30m. Saipem believes that, through the integration with Snamprogetti, the new Group could achieve cost synergies of €5m in 2006, €15m in 2007, and €30m in 2008. Therefore, Saipem expects that the acquisition of Snamprogetti can have a positive effect on net income from the first year.
The acquisition will be financed through credit lines available to Saipem and supplied by Eni's financial companies. Snamprogetti estimates net cash position at the end of 2005 being around €390m, almost half of which being derived from advances from customers.
UBS provided the Board of Directors of Saipem with an opinion as the fairness from a financial point of view of the purchase price.
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