Seismic group TGS, a provider of key information to the oil trade, has agreed to purchase loss-making rival PGS in an all-share deal valued at 9.3 billion Norwegian crowns ($864 million), the 2 Oslo-listed firms mentioned on Monday.
The teams anticipate “significant economies of scale” from the mixture, with a preliminary estimate of price cuts amounting to $50 million, they mentioned in a joint assertion.
The deal, if accredited by regulators, will give TGS possession of seven fashionable seismic ships, a major shift in technique for the corporate that has up to now relied on chartering vessels from ship house owners somewhat than shopping for its personal.
Collecting offshore seismic information and promoting it to power firms eager to find oil and gasoline deposits, generally known as multi-client enterprise, was lengthy affected by overcapacity, however there at the moment are fewer house owners and fewer vessels accessible, TGS mentioned.
“The key rationale here is that there are substantial synergies between the two companies, there is going to be really strong multi-client offering and we want to be self-sufficient with vessels,” TGS CEO Kristian Johansen advised analysts.
TGS, beforehand praised by analysts for its “assets light, cash rich” technique, mentioned the corporate wanted to vary because the multi-client market had shrunk to about one-third of what it was 10 years in the past.
While PGS is stronger in Europe, TGS’ information library is greater within the U.S. Gulf of Mexico and Brazil. The two have complementary choices in Africa and the Middle East, they mentioned.
TGS’ house owners will maintain two-thirds of the merged firm, paying an estimated 20.7% premium to PGS’ closing share worth on Sept. 15, they added.
PGS’ shares had been up 17% at 1215 GMT, whereas TGS’ had been up 4%.
The transaction is topic to sure situations, together with shareholder and regulatory approvals.
($1 = 10.7671 Norwegian crowns)
(Reuters – Reporting by Terje Solsvik and Nerijus Adomaitis; Editing by Louise Rasmussen and Mark Potter)
