Saipem and Subsea7 unveil merger plan

Italy’s engineering, drilling, and construction services giant Saipem has signed a memorandum of understanding (MoU) for the possible merger with global energy player Subsea7.

The two players reached an agreement in principle on the key terms of a possible merger, which is expected to result in the creation of a global market leader in the subsea and E&C Offshore sector. This is envisaged to boost the new firm’s competitive profile through operational synergies and strengthen its capital structure.

As the two companies consider each other complementary in terms of market offerings and geographies, their managements see this as a logical step, particularly considering the growing size of clients’ projects.

The new global organization called Saipem7, with a combined backlog of €43 billion, revenue of approximately €20 billion, and EBITDA of over €2 billion, would employ over 45,000 people, including more than 9,000 engineers and project managers.

The merger would bring together what the would-be partners see as their strengths–a full spectrum of offshore and onshore services, and a global workforce of over 45,000 people, including more than 9,000 engineers and project managers, in over 60 countries.

The expanded and diversified fleet comprising over 60 construction vessels would enhance the combined company’s ability to undertake a wide range of projects, from shallow water to ultra-deepwater operations.

The entering into and signing of binding definitive documents for the proposed combination is conditional on the completion of customary conditions precedent, such as confirmatory due diligence by the parties, the execution of a mutually satisfactory merger agreement, and the approval of the final terms by the boards of directors of Saipem and Subsea7 and the Italian government.

As stated by the future partners, the final terms of the proposed combination are expected to be submitted to their respective boards of directors for approval in mid-2025, when the duo would sign a merger agreement. The completion is expected to take place in the second half of 2026.

This follows the news of another big merger that could be in the making following speculation of a combination between two UK-headquartered energy majors, BP and Shell. Some industry experts believe that such a merger could redefine and launch the future of energy.

Structured as a cross-border merger of equals, the combination would be carried out by incorporating Subsea 7 into Saipem with a fixed exchange ratio of 50-50. Saipem, as the acquiring company, is set to maintain its headquarters and listing market in Italy, while also being listed on Norway’s stock exchange after the completion.

In addition to getting 6.688 Saipem shares for each Subsea7 share held, Subsea7 shareholders would receive an extraordinary cash dividend of €450 million before the completion of the merger.

The combined company would comprise four businesses: Offshore Engineering & Construction, Onshore Engineering & Construction, Sustainable Infrastructures, and Offshore Drilling.

The Offshore Engineering & Construction business would become an operationally autonomous company, named Subsea7 and branded as ‘Subsea7 – a Saipem7 Company,’ with John Evans at its helm. Headquartered in London, it would comprise all of Subsea7’s business and the asset-based services business of Saipem, representing approximately 83% of the combined group’s EBITDA of the last 12 months as of September 30, 2024.

In line with Saipem’s previous strategy, Onshore Engineering & Construction would focus on reducing overall risk and maximizing profitability. The Sustainable Infrastructures business would aim to consolidate its presence in the Italian market with potential expansion overseas, while the Offshore Drilling division will seek to continue to maximize its EBITDA and cash flow.

CDP Equity, Eni, and Siem Industries entered into a separate MoU to express their support for the proposed combination and agree on the terms of a shareholders agreement, to be effective from the completion of the proposed combination.

Among other things, the agreement provides for a three-year shareholder lock-up and standstill obligation and the submission of a common slate for the appointment of the majority of the members of the board of directors of the combined company.

Eni’s CEO, Claudio Descalzi, noted: “With this transaction we are creating a global leader of significant industrial and technological value. Over the past few years, Saipem has continuously improved its operational and financial performance, achieving a position of excellence that enables it to play a leading role in this major transformation. This is a great achievement that fully reflects the support we have provided in our role as shareholders.”

Under the MoU, Eni, CDP Equity, and Siem Industries, which will represent approximately 29% of the share capital (Siem 11.8%, Eni 10.6%, CDP Equity 6.4%, respectively), will form a stable core group of key shareholders that will appoint the majority of the board of directors. Alessandro Puliti, currently the Chief Executive Officer and General Manager of Saipem, is set to be appointed CEO of the combined company.

Eni and CDP Equity will see the value of their stake in Saipem increase, bringing benefits to their shareholders. They intend to work with Siem Industries and the merging companies to ensure the completion of the transaction within the announced terms.

Cassa Depositi e Prestiti’s CEO, Dario Scannapieco, commented: “Together with Eni, we have worked in harmony and successfully completed a major industrial transaction. The combination of Saipem and Subsea7 activities represents a significant strengthening of high-tech companies that are already well-established in their respective markets. From today, by leveraging their complementarity, they are creating a new entity destined to become a global leader in the sector.”

Apart from merger plans, Saipem recently outlined the progress made in what is said to be Angola’s first non-associated gas development. According to the Italian player, the largest gas production topside ever built in Angola was loaded out in Ambriz yard to sail away to the Quiluma offshore wellhead platform.

Meanwhile, Subsea7 won a contract with Equinor to deliver a front-end engineering and design (FEED) study with an engineering, procurement, construction and installation (EPCI) option before the final investment decision (FID) is reached for the Fram Sør development project.