Technip’s 50% Markup for CGG Is Enough to Start Talks: Real M&A
2014-11-20 19:22:12.638 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
Nov. 20 (Bloomberg) -- France’s CGG SA, the struggling
oilfield-services company that rejected a bid for $1.8 billion,
may want to reconsider.
Technip SA, also French, this week proposed buying the
seismic surveyor for 8.30 euros a share, almost 50 percent
higher than CGG’s average price in the previous 20 trading
sessions. CGG has slumped this year as it continues losing money
and burning through cash, and analysts were projecting that it’d
take a year just for the stock to get back up near 7 euros. The
offer would give its shareholders a chance for a quicker and
more attractive exit.
Even though CGG said the conditions to pursue a transaction
with Technip weren’t met, investors are betting the deal will
still get done and that price isn’t the issue. Data acquisition,
one of CGG’s three main businesses, has been dragging down the
company. Negotiations with Technip may come down to the fate of
that unit and its employees, given that Technip wants to
eventually separate it out.
“CGG is saying the conditions haven’t been met, but
they’re not saying ‘We’re unwilling to talk,’” said Alex
Brooks, a London-based analyst at Canaccord Genuity Corp. “I
don’t think this is primarily a price-driven discussion. The
overwhelming majority of shareholders would probably say yes
almost immediately to 8.30 euros a share. The question is
whether they can get the board and employee representatives on
that board to agree to the proposal.”
Government Interest
The French state, which has stakes in both, may also help
facilitate an agreement between the companies. The government is
pushing for a combination, according to a person familiar with
the matter.
Oil explorers such as Total SA use CGG’s technology to make
seismic studies of the earth’s geology, including under ocean
floors, to locate and estimate the size of reserves. Oil
companies have been reining in spending, though, amid a supply
glut, which has made CGG’s stock volatile in recent months. The
company renegotiated debt terms and cut its fleet and workforce
this year.
Crude prices have also plunged in the past month, which is
encouraging takeovers in the industry as valuations turn cheap.
Just this week, Halliburton Co. agreed to buy Baker Hughes Inc.
for $35 billion, bringing together the world’s second- and
third-largest oil-services providers. Siemens AG is buying
Dresser-Rand Group Inc. in a $7.5 billion deal to expand its
business with oil-and-gas equipment in the U.S.
Should Technip’s pursuit of CGG succeed, it will be the
ninth-biggest acquisition in the industry this year. The
proposal values CGG at $1.8 billion, plus Technip would assume
its $2.6 billion of net debt.
CGG’s Paris-listed stock jumped 22 percent today to 7.95
euros apiece, still 4.2 percent below Technip’s proposed offer.
The spread signals that investors are betting a deal will get
done and that competing offers are unlikely.
For Related News and Information:
Technip Offers $1.8 Billion to Buy French Oil Surveyor CGG
Halliburton Agrees to Buy Baker Hughes for $34.6 Billion
Big Oil Deals Are Back as Halliburton Makes First Move: Real M&A
Top commodity news: TOP CMD <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2014-11-20 19:22:12.638 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
Nov. 20 (Bloomberg) -- France’s CGG SA, the struggling
oilfield-services company that rejected a bid for $1.8 billion,
may want to reconsider.
Technip SA, also French, this week proposed buying the
seismic surveyor for 8.30 euros a share, almost 50 percent
higher than CGG’s average price in the previous 20 trading
sessions. CGG has slumped this year as it continues losing money
and burning through cash, and analysts were projecting that it’d
take a year just for the stock to get back up near 7 euros. The
offer would give its shareholders a chance for a quicker and
more attractive exit.
Even though CGG said the conditions to pursue a transaction
with Technip weren’t met, investors are betting the deal will
still get done and that price isn’t the issue. Data acquisition,
one of CGG’s three main businesses, has been dragging down the
company. Negotiations with Technip may come down to the fate of
that unit and its employees, given that Technip wants to
eventually separate it out.
“CGG is saying the conditions haven’t been met, but
they’re not saying ‘We’re unwilling to talk,’” said Alex
Brooks, a London-based analyst at Canaccord Genuity Corp. “I
don’t think this is primarily a price-driven discussion. The
overwhelming majority of shareholders would probably say yes
almost immediately to 8.30 euros a share. The question is
whether they can get the board and employee representatives on
that board to agree to the proposal.”
Government Interest
The French state, which has stakes in both, may also help
facilitate an agreement between the companies. The government is
pushing for a combination, according to a person familiar with
the matter.
Oil explorers such as Total SA use CGG’s technology to make
seismic studies of the earth’s geology, including under ocean
floors, to locate and estimate the size of reserves. Oil
companies have been reining in spending, though, amid a supply
glut, which has made CGG’s stock volatile in recent months. The
company renegotiated debt terms and cut its fleet and workforce
this year.
Crude prices have also plunged in the past month, which is
encouraging takeovers in the industry as valuations turn cheap.
Just this week, Halliburton Co. agreed to buy Baker Hughes Inc.
for $35 billion, bringing together the world’s second- and
third-largest oil-services providers. Siemens AG is buying
Dresser-Rand Group Inc. in a $7.5 billion deal to expand its
business with oil-and-gas equipment in the U.S.
Should Technip’s pursuit of CGG succeed, it will be the
ninth-biggest acquisition in the industry this year. The
proposal values CGG at $1.8 billion, plus Technip would assume
its $2.6 billion of net debt.
CGG’s Paris-listed stock jumped 22 percent today to 7.95
euros apiece, still 4.2 percent below Technip’s proposed offer.
The spread signals that investors are betting a deal will get
done and that competing offers are unlikely.
For Related News and Information:
Technip Offers $1.8 Billion to Buy French Oil Surveyor CGG
Halliburton Agrees to Buy Baker Hughes for $34.6 Billion
Big Oil Deals Are Back as Halliburton Makes First Move: Real M&A
Top commodity news: TOP CMD <GO>
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman