TGS-NOPEC Board, Management Say Nay to Merger
The Board of Directors and the Executive Management of TGS-NOPEC Geophysical Company ASA have recommended to the Company's shareholders to terminate the merger process with Wavefield Inseis and to seek compensation limited upwards to US $700 million.
During the past 12 months, TGS-NOPEC Geophysical Company ASA ("TGS") has worked diligently to make the merger with Wavefield Inseis ASA ("Wavefield") a success. In contrast, Wavefield has consistently objected to completing the agreed and approved merger since October 2007, and has required improvements in the favour of Wavefield shareholders as conditions to complete the merger.
"In recent weeks we have made our best efforts to find an amicable solution that could lead to a successful merger. Despite the willingness from TGS to increase the exchange ratio and change both the constitution of the Board and the management reporting structure, Wavefield management was unable to demonstrate to our satisfaction an enthusiastic commitment to a true integration of the two companies", says Hank Hamilton, CEO of TGS.
The Management and the Board of TGS are unanimously of the view that a friendly merger is no longer possible, and that a merger now would subject TGS and its shareholders to unacceptably high operational and financial risks that will likely lead to value destruction. In conducting its evaluation TGS has placed more emphasis on the actions taken by Wavefield management than statements by them that might seem to contradict such actions. Therefore, TGS has concluded that a merger with Wavefield is not in the best interests of its shareholders.
"We expect the next two to three years to present the most favourable market conditions we have ever experienced for our products and services. We need to be fully occupied on converting these opportunities into profit, rather than dealing with the serious internal strife caused by a contentious integration process", says Hamilton.
The Board and management of TGS have unanimously decided to recommend their shareholders to drop the claim for completion of the merger in the arbitration process. TGS originally included an alternative claim in the arbitration process for compensation from Wavefield limited upwards to USD 700 million. This compensation claim will now become the principal claim. The amount is calculated from forgone synergies, net forgone earnings due to delay of merger, foregone multi-client capex cost savings, and advisor fees and expenses associated with deal.
The Extraordinary General Meeting of TGS shareholders will take place on September 2, 2008, in Oslo at 15:00 CET.
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