Offshore oil services firm Subsea 7 (SUBC.OL) has made an unsolicited offer for U.S. rival McDermott (MDR.N) for about $2 billion, potentially breaking up the U.S. company’s agreed deal with Chicago Bridge & Iron (CB&I), Reuters reported.
Subsea said McDermott’s board had rejected its proposal on April 20 but also said the U.S. company could receive a higher bid if it agreed to talks.
McDermott in December had agreed to buy onshore engineering company CB&I (CBI.N) in an all-stock deal worth $1.86 billion at the time and said this would improve its ability to serve customers worldwide.
Subsea 7 said in a statement on Monday its bid proposal was subject to the termination of McDermott’s pending transaction with CB&I.
The M&A activity follows a tough time for the oil services industry which was hit badly by the fall in oil prices and the spending cuts by major oil companies that followed.
Subsea 7’s biggest shareholder, Norwegian billionaire Kristian Siem, has long called for the industry to consolidate, saying this was the way to cope with oil companies’ cost cuts.
Subsea 7 has offered McDermott $7 per share, either in cash or up to 50 percent in stock, representing a premium of 16 percent over McDermott’s closing share price on Friday of $6.05.
“Subsea 7 will consider increasing its proposed price upon further assessment of McDermott’s business through discussions with McDermott management,” Subsea 7 said.
“Additionally, for any stock consideration, Subsea 7 is open to discussing listing options for the shares of the combined company,” it added.
CB&I and McDermott shareholders are due to vote on their planned deal early next month.
“It’s a very well played offer from the Subsea 7. Timing wise, it gives enough time for McDermott management to consider alternatives before the May 2 vote,” Carnegie analyst Frederik Lunde said.
Subsea 7 said combining the two companies would help them to handle large offshore engineering contracts for the oil industry, known as EPCI projects, with Subsea 7’s strengths in Brazil, the Gulf of Mexico and the North Sea complementing McDermott’s strengths in the Middle East, India and Australia.
Subsea also said the deal offered “highly visible economies of scale and cost synergies”, boosting profitability and competitiveness.
McDermott’s CB&I deal earlier this month got support from Institutional Shareholder Services Inc, an independent proxy advisory firm, which said it would help McDermott diversify geographically and add exposure to U.S. onshore.
Some of McDermott’s shareholders, however, have opposed the deal, citing CB&I’s latest performance.
Subsea 7 shares gained more than 2 percent in early trade on Monday.
Additional reporting by Terje Solsvik, editing by Gwladys Fouche and Jane Merriman
