Technip and FMC Technologies Inc. plan to combine in an all-stock merger. The combined company, to be named TechnipFMC, is expected to have an equity value of $13 billion based on pre-announcement share prices.
Under the terms of the memorandum of understanding, 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. Each company's shareholders will own close to 50% of the combined company.
Thierry Pilenko, Technip chairman and CEO, who will serve as executive chairman of TechnipFMC, stated, "A year ago, we were at the forefront of recognizing the importance of a broader view of our clients' challenges and seized the opportunity that working together in our alliance could bring. Today we want to take this strategy further and across the full footprint of the two companies. We have complementary skills, technologies and capabilities which our customers can access on an integrated basis or separately as they prefer. Together, TechnipFMC can add more value across Subsea, Surface and Onshore/Offshore, enabling us to accelerate our growth."
The new company will combine Technip's systems and solutions, assets, engineering, and project management capabilities with FMC Technologies' technology, manufacturing, and service capabilities.
The transaction expected to deliver at least $400 million in annual pretax cost synergies, the companies noted. Following the deal’s closing, the combined company will implement a new organizational plan. The combined company expects to achieve pretax cost synergies of approximately $200 million in 2018, and of at least $400 million in 2019 and thereafter. The combined company had a consolidated backlog of $20 billion as of March 31, 2016, providing revenue visibility over the mid-term.
Under the terms of the agreement, FMC Technologies and Technip will be merged into a new entity. At closing, each share of Technip common stock will be converted into 2.0 ordinary shares of TechnipFMC and each common share of FMC Technologies will be exchanged for 1.0 ordinary share of TechnipFMC.
Technip Chairman and CEO, Thierry Pilenko, will serve as executive chairman of TechnipFMC's Board of Directors. Doug Pferdehirt, currently FMC Technologies' president and COO, will serve as CEO of TechnipFMC. FMC Technologies announced on May 9, 2016 that Doug Pferdehirt will be appointed as CEO of FMC Technologies effective September 1, 2016.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, France, (where the executive chairman will have his principal office), in Houston, Texas, (where the CEO will have his principal office) and in London, UK (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.
Upon closing, TechnipFMC shares will trade on the New York Stock Exchange and on the Paris Euronext Stock Exchange.
The business combination was unanimously approved by the eligible directors of the Boards of both companies. 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.
Cowen and Company analysts say the deal looks positive and it does not expect any regulatory issues.
Goldman Sachs and Rothschild are acting as financial advisors and Darrois Villey Maillot Brochier and Davis Polk & Wardwell LLP are serving as legal counsel to Technip. Evercore and Société Générale are acting as financial advisors and Latham & Watkins LLP is serving as legal counsel to FMC Technologies.