Subsea7 S.A. SUBCY, an offshore engineering and construction services provider, recently announced that it has agreed on the key terms for a potential merger with Saipem S.p.A, an Italian oilfield services firm. The agreement has been reached in principle via a Memorandum of Understanding (MoU).
The MoU has been signed by Siem Industries, a key shareholder of Subsea7, and CDP Equity and Eni S.p.A, reference shareholders of Saipem. Per Reuters, Eni had engaged in discussions about a possible collaboration with Subsea7 years ago. However, the companies could not reach an agreement back then. By signing the MoU, these key shareholders demonstrate their support for the deal. The combined entity shall be listed on the Milan as well as the Oslo stock exchange.
Shareholder Impact & Dividend Distribution
The proposed merger deal is anticipated to create a leading player in the global energy services market. The combined entity will be renamed as Saipem7. The deal is estimated to have a valuation of $4.63 billion. Saipem7 will boast a combined backlog of approximately €43 million, per Subsea7. Shareholders of Subsea7 and Saipem will hold equal stakes in the combined firm’s share capital. Furthermore, SUBCY shareholders will receive 6.688 Saipem shares against each of Subsea7’s shares owned. Subsea7 has also announced an extraordinary dividend payment totaling €450 million to its shareholders prior to the execution of the merger.
The management of both companies believes that the decision to merge their operations, creating a global leader in the offshore energy services sector, is beneficial given the expansion of client projects in the current market. The two companies highly complement each other in terms of their services offered in the global energy market as well as the geographies they operate in, making the merger a strategic fit. The combination of the two companies is also expected to benefit shareholders in the long run as well as in the current market scenario. The merger should enable the combined firm to benefit from operational synergies as well as enhanced market presence.
Global Market Expansion & Fleet Capabilities
The merger is also expected to benefit their global client base, as it consolidates the strength of the two companies. The combined company offers a comprehensive range of offshore and onshore services for clients in the oil, gas, carbon capture and renewable energy sectors. Furthermore, the merger expands the company’s global presence, expanding to over 60 countries.
The combined entity would also leverage a large, diversified fleet consisting of over 60 construction vessels, enabling it to take over a wide range of projects within shallow water, deepwater and ultra-deepwater environments. The diverse portfolio of assets involves heavy lift, high-end J-lay, S-lay and reel-lay pipeline solutions for rigid pipelines. Furthermore, the fleet shall also offer flexible pipe and umbilical lay services. For the renewable energy space, the combined company has the capability to offer exceptional wind turbine, foundation, and cable lay installation services.
Expected Cost Synergies
The deal is expected to conclude by the second half of 2026. It is anticipated to generate annual cost synergies equivalent to approximately €300 million in the third year after completion, driven by better utilization of the combined fleet, procurement and process efficiencies and improved marketing of services.
SUBCY’s Zacks Rank and Key Picks
SUBCY currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the energy sector are SM Energy SM, Equinor ASA EQNR and Archrock Inc. AROC. While SM Energy sports a Zacks Rank #1 (Strong Buy) at present, Equinor and Archrock carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
SM Energy is set to expand its oil-centered operations in the coming years, with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The increased production, combined with the favorable oil price environment, is expected to positively contribute to its bottom line.
Equinor ASA is one of the leading integrated energy companies globally and the second-largest supplier of natural gas in Europe. The company’s expansion in the renewable energy space positions it for long-term growth as more and more countries transition toward cleaner energy solutions to meet their climate goals. Its strategic pivot toward low-carbon energy solutions unlocks new revenue streams in the growing market for clean energy and carbon management solutions.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
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