Subsea 7’s £1.4billion takeover bid for McDermott represents a move to “assume the throne” for the global subsea umbilicals, risers and flowlines market (SURF), according to analysts Rystad Energy.
UK-based oil services firm Subsea 7 yesterday confirmed it had made a rejected move for the US rival, in a bid to potentially break-up McDermott’s pending merger deal with Chicago Bridge & Iron (CB&I).
The company added that McDermott could receive a higher bid if it agreed to talks.
Rystad Energy says the acquisition would create a powerful new entity which could make Subsea 7 the global market leader in the SURF sector.
A merged Subsea 7-McDermott would have a combined market share of 24%, followed by TechnipFMC at 20% then Saipem at 15%.
Audun Martinsen, vice president of Rystad’s Oilfield Service Research said: “The train is about to leave the station. McDermott is the only acquisition target that could make Subsea 7 the market leader in the SURF sector.
“With this proposed acquisition, Subsea 7 is hoping to strengthen its offshore SURF and engineering capabilities, and it would propel the company beyond TechnipFMC and Saipem to assume the global throne in that segment.”
With Subsea 7’s success in the North Sea, Africa and Americas, Rystad says it is a strong match with McDermott’s work in the Middle East, Asia and Australia.
Rystad estimates that a merger between the two could expect to achieve annual market growth of six percent annually.
Mr Martinsen added: “Geographically speaking, Subsea 7 and McDermott are a perfect match.
“Subsea 7 does have presence in the Middle East market with its acquisition of Emas Chiyoda’s subsea business, but that region still only represents less than 5% of its business.
“With the McDermott business, it would grow to 15% for the combined entity.
“Oil prices have climbed considerably since December and, according to our analysis of oil market fundamentals, the offshore service market will see a clear comeback as the world will need more offshore production.
“Hence we think McDermott’s board of directors now faces a bit of dilemma on how to respond to the takeover bid by Subsea 7.”