Saipem SpA is considering a combination with rival Subsea 7 SA in what could rank as one of the European oil services industry’s biggest-ever deals, people with knowledge of the matter said. Such a merger would create the fourth-largest oilfield service company, after Schlumberger, Halliburton and Baker Hughes.
The Italian company is pursuing a potential transaction with Norway-listed Subsea 7 as it seeks to bulk up and weather an industry downturn, according to the people, who asked not to be identified because the information is private. Subsea 7, which has a market value of about $3.3 billion, rose as much as 8.4% in Oslo trading Friday for the biggest advance in more than two years. Saipem jumped as much as 5.3%. Both companies later pared their gains. Saipem isn’t the only company from the Italian energy industry seeking growth abroad. This year, Eni and OMV AG acquired a $5.8 billion stake in Abu Dhabi National Oil Co.’s refining unit. Since 2000, Eni has racked up 10 acquisitions each worth at least $1 billion.
By combining with Saipem, Subsea 7 would also get exposure to onshore engineering and construction, where Saipem has a solid track record in the petrochemical and liquefied natural gas industries, thus reducing dependence on upstream oil and gas activities. Furthermore, Saipem has a legacy name in the Middle East and many contracts in this booming market. With this move, the merged entity could fight McDermott for the leading role in the oilfield services segment in the region.