Acergy, Subsea 7 to Combine Cos in $5.4B Merger

Acergy and Subsea 7 have agreed to combine the two companies. The transaction will create a combined entity with:

  • A market value of $5.4 billion and a global organization of 12,000 people
  • The capability and resources to address the worldwide growth in size and complexity of subsea projects
  • Enhanced local presence in all major offshore oil and gas regions
  • The full spectrum of subsea services – SURF, Conventional and Life-of-Field, a high-end diversified fleet and extensive fabrication and onshore facilities
  • Expected annual synergies of at least $100 million
  • A backlog of $5.3 billion with a complementary mix by contract type and geographical region as at May 31, 2010

Combination structure and terms

  • The combination is based on an agreed ratio between the equity value of Acergy and Subsea 7 of 54:46 (Acergy:Subsea 7)
  • Subsea 7's shareholders to receive 1.065 Acergy common shares for every Subsea 7 common share
  • The Board will have a majority of independent directors and be chaired by Subsea 7's current Chairman, Kristian Siem
  • The new entity, to be named Subsea 7, will be led by a highly experienced executive management team comprising: Chief Executive Officer, Jean Cahuzac; Chief Operating Officer, John Evans; and Chief Financial Officer, Simon Crowe
  • Completion is anticipated towards the end of this year or the first quarter of 2011, subject to shareholder approval, regulatory approvals and other customary completion conditions
  • The Board of Directors of both companies have unanimously agreed to recommend the combination to their respective shareholders

Transaction background

Both Boards believe that the combined entity will be better able to meet the growing size and technical complexity of subsea projects, driven by the demand to access ever more remote reserves in increasingly harsh environments. The combination will create a global leader in seabed-to-surface engineering and construction able to provide clients a step-change in service offering. This includes engineering, procurement, installation and commissioning services for Subsea Umbilical, Riser and Flowline projects (SURF), Conventional field development and Life-of-Field services (including Inspection, Repair and Maintenance, Survey and Decommissioning).

The new entity will provide access to a high-end, well diversified fleet, comprising in aggregate 43 vessels that will allow more flexibility to optimize fleet schedules. It will also be able to offer clients a greater depth of project management, engineering, technical expertise and high-value technologies. The excellent strategic fit of the different strengths of each company positions the new company to deliver enhanced long-term value for all stakeholders.

Based on preliminary analysis, annual synergies of at least $100 million are expected to be realized within three years of completion from overhead and operating cost savings, more efficient supply chain management and the benefits of an enlarged global fleet.

Based upon closing prices for each company's ordinary shares as of June 18, 2010, the market capitalization of the combined entity is approximately $5.4 billion. The combination of the two current businesses is expected to result in a company with a combined backlog of $5.3 billion as at May 31, 2010, a global organization of 12,000 people and an enhanced local presence in all major offshore oil and gas regions.

Commenting on the agreement, Subsea 7 Chairman, Kristian Siem said, "The combination is an excellent strategic fit, with industry fundamentals strongly supporting the logic of the combination. The size of the combined company will be in harmony with the size of the projects we perform for our clients. It also aligns perfectly with our strategy of providing high-quality subsea engineering and construction services for our clients while providing increased value for all our shareholders. The combined entity will be well positioned to take advantage of future growth opportunities in the subsea market globally."

Acergy Chairman, Sir Peter Mason KBE said, "This combination is an exciting opportunity for our shareholders, our clients and our people. The combined entity will have a stronger balance sheet, enabling efficiencies of scale and capital deployment. The enhanced operational capability will produce significant benefits for our clients and provide substantial growth opportunities for our people, which is expected in turn to deliver greater value creation for our shareholders."

Value creation for clients and employees

The combination will create a global leader in seabed-to-surface engineering and construction with a presence in all major offshore oil and gas regions and the ability to deliver the next generation of complex subsea projects. The combined entity is expected to deliver a step-change in service provision for existing and new clients.

In addition, the combination will bring together two existing high quality workforces to create a single best-inclass team with a common culture and values. Both Acergy's and Subsea 7's existing management teams believe that employees will benefit from great opportunities within the combined entity.

Commenting on the combination, Acergy's Chief Executive Officer, Jean Cahuzac said, "This combination will create a global leader in seabed-to-surface engineering and construction that can secure and deliver offshore projects of the size and complexity that will emerge in the coming decade. The success of this combination is underpinned by the shared values we each have in safety and excellence; and a desire to achieve our common objective of creating a leader in the seabed-to-surface engineering and construction

Subsea 7's Chief Executive Officer, Mel Fitzgerald said, "The combination with Acergy is an excellent strategic fit for both companies, their people and clients. We believe that the combination of Acergy's and Subsea 7's people along with a diverse and highly complementary fleet, will provide a great vehicle for creation of additional client and shareholder value. This coming together is a tremendous opportunity for personal and professional development for Subsea 7 and Acergy employees."