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Investing.com -- Saipem (BIT:SPMI), the Italian oil services firm, announced on Sunday that it will merge with Norwegian competitor Subsea 7 SA (OL:SUBC) in a deal worth approximately $4.63 billion.
Subsea 7 shares popped more than 7% while Saipem climbed around 3% in European trading Monday following the news. Italian newspaper La Repubblica first reported on the merger on Sunday.
Under the terms of the agreement, Subsea 7 shareholders will receive 6.688 Saipem shares for each of their existing shares, the companies said in a statement. The company will issue a special dividend of €450 million just before the deal closes.
The merged entity, set to be renamed Saipem7, will have a "combined backlog" of €43 billion ($45 billion), along with annual revenue of around €20 billion and EBITDA exceeding €2 billion, according to the statement.
Ownership of the new company will be split equally, with Saipem and Subsea 7 shareholders each holding a 50% stake.
“The deal terms put a premium on Subsea 7’s market cap relative to Saipem based on Subsea 7 distributing €450m in cash to shareholders prior to the deal’s completion,” RBC Capital Markets analysts commented.
Saipem, which is backed by energy giant Eni and Italian state lender Cassa Depositi e Prestiti (CDP), had previously explored a potential merger with Subsea 7, though discussions did not lead to a deal at the time.
The agreement has the backing of key stakeholders, including Siem Industries, Subsea 7’s reference shareholder, as well as Eni and CDP Equity, which hold stakes in Saipem. The parties have signed a memorandum of understanding in support of the transaction.
The deal is expected to generate annual synergies of around €300 million within three years of completion, the companies added.
“Agreement in principle by Saipem & Subsea 7 on key terms of a possible merger is a positive move, in our view,” Jefferies analysts said.
“Sustained sector demand likely requires combined balance sheet & capabilities while valuation discount to US peers can be addressed. We recall media stories in 2019 on such a move & do not discount a potential role of Elliot in this announcement,” they added.