PARIS and HOUSTON–Technip and FMC Technologies Inc. will combine to form TechnipFMC, in a move the two companies said will create a “comprehensive and flexible offering across each market from concept to project delivery and beyond.”
The companies have entered into a memorandum of understanding (MoU) and said in a joint statement that they expect to execute a definitive business combination agreement to combine the companies in an all-stock merger transaction. The resulting TechnipFMC will be valued at $13 billion (based on pre-announcement stock prices).
Bill Herbert, an analyst at Simmons & Co., told Bloomberg in a report that he does not expect any issues faced during thefailed Baker Hughes-Halliburton merger with this combination.
“The Halliburton-Baker transaction was a multifaceted transaction encompassing classic consolidation of several overlapping competitive product service lines,” Herbert said. “Technip and FTI [FMC Technologies Inc.]? They’re completely different animals. There is no overlap whatsoever.”
The strategy of offering a more life-of-field solution to the market was presaged by the earlier alliance between the two companies,Forsys Subsea, which the two parent companies said will help in enabling rapid integration.
With more than 49,000 employees operating in more than 45 countries, TechnipFMC generated 2015 combined revenue of approximately $20 billion and combined 2015 EBITDA of approximately $2.4 billion. As of March 31, 2016, the two companies together had consolidated backlog of approximately $20 billion.
Each company’s shareholders will own close to 50% of the combined company. Under the terms of the MoU, Technip shareholders will receive two shares of the new company for each share of Technip, and FMC Technologies shareholders will receive one share of the new company for each share of FMC Technologies.
Thierry Pilenko, Technip’s chairman and CEO, will serve as executive chairman of TechnipFMC. Doug Pferdehirt, president and COO of FMC Technologies, will serve as CEO of TechnipFMC.
Pferdehirt said: “Our alliance has shown that as customers evaluate solutions, they are involving us in the process earlier and to a greater degree than ever before. The more they seek our recommendations and new products, the more we differentiate ourselves from the competition.
“This transaction will allow us to deliver even greater benefits to our customers through a broadened portfolio that provides a unique set of integrated technologies and competencies that are underpinned by a history of developing rich partnerships and creating customer success.”
The new company will combine Technip’s systems and solutions, assets, engineering strengths and project management capabilities with FMC Technologies’ technology, manufacturing and service capabilities.
Together, TechnipFMC will engage with customers earlier in the development process to design, deliver and install more comprehensive solutions, the companies’ statement said, noting that “the combined company allows for a simplified, go-to-market strategy that spans from individual products or services to fully integrated solutions. With a single interface to ensure seamless execution, the combined company will significantly reduce the cost of development for customers for both new and existing fields.”
It will expand on competencies in digital life-of-field and data management services to reduce maintenance and enhance production.
The board of directors will consist of seven members designated by FMC Technologies, including Doug Pferdehirt, and seven members designated by Technip, including Thierry Pilenko.
The group will organize its activities into five business units covering Surface, Subsea Services, Products, Subsea Projects, and Onshore/Offshore, with the first two headquartered in Houston and the others in Paris.
TechnipFMC will have its operational headquarters in Paris, (where the executive chairman will have his principal office), in Houston, (where the CEO will have his principal office) and in London (where the Forsys Subsea JV is headquartered and the new corporation will be domiciled).
The global Integrated Research and Development center will be located in France and is expected to grow as it drives innovation and technology throughout the new company.
The business combination was unanimously approved by the eligible both companies’ board of directors. The transaction is expected to close early in 2017, subject to the approval of both Technip and FMC Technologies shareholders, regulatory approvals and consents, as well as other customary closing conditions. Bpifrance Participations and IFPEN, shareholders of Technip, support the transaction as presented.