Two oilfield service companies with a substantial presence in the north-east have pulled out of a possible merger.
Acergy and Subsea 7 revealed yesterday that they had discussed a tie-up, but the talks ended on Monday.
Shares in both companies surged on the news, with analysts saying that both could be attractive acquisition targets for other large oilfield service firms.
Acergy and Subsea 7, which both also announced third-quarter results yesterday, have invested tens of millions of pounds in new offices side by side on the Arnhall Business Park at Westhill, near Aberdeen.
Although subsea is a buoyant market just now, a tie-up between the two firms would potentially have led to job cuts as the enlarged group went about integrating the businesses.
The attempted merger between two of the sector’s key players came as a surprise to Andrew Reid, the Aberdeen-based managing director of energy consultant Douglas-Westwood.
Mr Reid said there was some logic to the move, such as economies of scale and better access to capital for two complementary businesses, but both firms were progressing well on their own and had strategic growth plans in place.
Industry analyst Haakon Amundsen, of Swedish bank Handelsbanken, was also surprised the pair had held talks, although further consolidation of the subsea sector is expected.
Mr Amundsen said: “There are other companies in the sector that are surely interested in Subsea 7 and Acergy. Both will be interesting to large oil service companies that have the opportunity.”
Acergy, which has its head office in London, said: “The Acergy board gave this approach its fullest consideration, but decided to continue with its independent strategy.”
Subsea 7 said simply that a combination of the two companies had been discussed, with the talks now terminated. The Norwegian-owned firm said in its third-quarter report, however, that it bought convertible notes and shares in Acergy for £105.6million during the three months to September 30.
Subsea 7, which has its global operational HQ at Westhill, added that it was treating these assets – bought before the merger talks began – as “available for sale”.
Kristian Siem, the firm’s chairman and principal shareholder, said the decision to break off the talks with Acergy was final.
He also revealed that Subsea 7 had initiated the discussions “this time”, with a potential merger having been discussed by the two companies previously. He added: “We gave this combination possibility a full go. There was not a minute of extra time to discuss alternatives.”
Acergy reported a 38% year-on-year rise in pre-tax profits to £95.1million for the three months to August 31, while third-quarter pre-tax profits at Subsea 7 fell to £58.2million from £68.7million a year earlier.