French seismic and data processing firm CGG has rebuffed a takeover by fellow-French engineering and project management firm Technip.
Technip said it made the approach on Monday 10 November.
The move, says Technip, would create a first tier oil and gas services provider by integrating and developing CGG’s reservoir and data processing and seismic equipment activities within Technip.
CGG this morning confirmed that Techip had approached the company, "in an unsolicited manner in respect of a potential combination." But, CGG said: "CGG has considered that the conditions to pursue were not met." Bloomberg later reported that the firm was now considering putting itself up for sale.
Technip's bid for CGG comes just days after Halliburton revealed plans to acquire Baker Hughes, turning the big three US oilfield services into two, with the combined Haliburton/Baker Hughes up against Schlumberger. Other deals have seen joint ventures set up, to create integrated offerings to the industry, such as OneSubsea - the JV between Cameron and Schlumberger. Aker Solutions and Baker Hughes formed a subsea alliance earlier this year.
Analysts Investec said: "The oil price collapse in 1998 catalyzed a wave of industry consolidation amongst the international oil companies. The collapse in 2014 seems to be doing the same for the OFS sector. Halliburton plus Baker Hughes makes sense, in our view. Technip plus CGG less so. Technip will also have to convince that the hand of the French government is not at work here.
"This is not an obvious deal, in our view. While broadening one’s service offering has been a key driver of OFS consolidation over the past decade, CGG’s seismic plus Technip’s E&C and subsea fabrication plus installation are not obvious bedfellows in the value chain. Technip is proposing to integrate CGG’s data processing and its equipment (Sercel) activities while separating CGG’s fleet of offshore vessels (acquisition). Technip suggests this would be run separately, implying it may be sold/floated in due course.
"While Technip has a strong acquisition track record, there is the natural suspicion that the French’s government’s dirigiste approach may be at work here. However, we note the timing of the approach preceded the HAL/BHI deal (Friday 14 Nov). Seismic is the main activity missing from the combined HAL/BHI portfolio."
"This combination would create a unique value proposition in our industry, offering technology, engineering, equipment and project management from the reservoir across the entire production system," said Technip, of its proposed takeover of CGG.
The proposed transaction would take the form of a public tender offer in cash for CGG’s shares at a price of 8.30 euros per share.
Technip added: "Technip would be ideally positioned to best address its clients’ increasingly complex cost and project challenges. As part of this project, Technip would reinforce and then separate the acquisition division of CGG. Given the intrinsic strengths of this division and its people, Technip expects this business to become a sustainable leader in a sector that has its own characteristics."
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