TECHNIP: €1.5 BLN FOR CGG
Technip, Europe's biggest oil and gas services group by market capitalisation, has made a €1.47bn cash bid for French seismic surveyor CGG, but the offer was rebuffed on Thursday.
The offer comes amid consolidation between oil services companies as they grapple with falling crude prices and cost-cutting by energy explorers, their largest clients. Halliburton of the US earlier this week agreed a $38bn takeover of Baker Hughes.
Paris-based Technip said it had offered €8.3 a share for CGG, which collects and analyses seismic data for oil groups as well as builds seismic equipment. This represents a 28 per cent premium to CGG's closing share price on Wednesday.
"The deal points to Technip's vaulting ambition to step into the 'big league' of global oil services," said Nicholas Green, an analyst at Bernstein. "We believe this is the right strategy for the winning European player."
The French government, which owns 7 per cent of CGG and 5.2 per cent of Technip through its investment bank Bpifrance, is likely to be involved in any deal involving the two companies.
Shares in CGG, which have been climbing throughout November on deal rumours, jumped 23 per cent on Thursday, despite the company rebuffing the deal. Shares in Technip fell 7 per cent.
CGG turned down the offer saying that "conditions to pursue were not met". People close to the company criticised the bid price and Technip's proposal to spin off CGG's acquisition division, which runs a fleet of 13 ships to scan oil and gasfields.
Technip said it would continue to try and talk to CGG management. "Technip would like to enter into a constructive dialogue with CGG's board of directors concerning its project that provides a strong strategic and industrial logic," it said.
Shares in CGG have fallen sharply in recent years, with the group suffering in the aftermath of a €1.2bn acquisition in 2012 of part of Fugro, a Dutch energy surveying company, which added debt at a time when wider market pressures were starting to emerge.
Global oil majors have in recent years been under pressure to cut operating costs, reduce capital expenditure and return more cash to shareholders.
Compounding the problems, the crude price has fallen about 30 per cent since June, placing additional pressure on energy groups to secure savings with the oil services companies, among others. There have been warnings from the International Energy Agency and analysts that the oil price could fall further.
In August CGG announced it was getting rid of 10 per cent of its roughly 10,000 employees while its third-quarter results recorded a $116m net loss. In early April Standard & Poor's and Moody's both cut the group's credit rating.
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