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Technip Buys Global Industries for $937 Million to Expand in Subsea Orders

13 September 2011

Technip SA (TEC), Europeís second-biggest oil services company, agreed to buy Global Industries Ltd. (GLBL) of the US for $937 million in cash to expand in the market for underwater energy projects.

The offer price is $8 a share, 55 percent more than Global Industriesí closing price on Sept. 9, Paris-based Technip said today in a statement. It will also assume $136 million in debt.

The global market for subsea oil and gas infrastructure is about $30 billion and the deal will expand the portion Technip can supply from about one-third currently, Chief Executive Officer Thierry Pilenko said. The price is about 1.4 times Global Industriesí enterprise value, more expensive than the 1.1 multiple of 10 recent deals in the energy-services industry, according to Bloomberg data.

"Itís a game changer for Technip in subsea and will broaden their client scope,Ē said Bastien Dublanc, a analyst at RBC Europe Ltd. The high valuation "is a strong reminder of the underlying long-term drivers of the industry,Ē he added.

Global Industries rose $2.62, or 51 percent, to $7.77 at 9:30 a.m. on the Nasdaq Stock Market. Technip fell as much as 3.9 percent in Paris and pared its loss to 1.4 percent. The shares are down 6.9 percent this year.

Global Industries will add 14 vessels, bringing Technipís fleet to 34, and will expand its market by around 30 percent in deep-to-shore subsea infrastructure, according to the statement.
Earnings Addition

The purchase, unanimously approved by the board of Carlyss, Louisiana-based based Global Industries, will add about 5 to 7 percent to Technipís earnings per share in 2013, Pilenko said. The deal is scheduled to be completed early next year.

"The subsea market looks likely in 2011 to show a record amount of orders for our industry,Ē Pilenko said in the statement. Offshore projects are expected to start in Brazil, the Gulf of Mexico, West Africa and Asia Pacific, he said.

High oil prices, combined with increasing demand for natural gas, are driving investments according to Technip, which makes equipment for oil and gas exploration and builds liquefied natural gas installations. Its biggest competitor in Europe is Italyís Saipem SpA.

The extra vessels will reinforce Technipís presence in the Gulf of Mexico and the Middle East and help the French company compete with Saipem, according to Dublanc.
Due Diligence

The French company carried out "extensive and intensiveĒ due diligence on Global Industries, examining so-called paper values of assets as well as physical inspections, Chief Financial Officer Julian Waldron said. He said he doesnít see a risk of writing down the value of the assets in the future or from Globalís existing order book.

Technip is seeking to broaden the range of its services to producers including Exxon Mobil Corp., Royal Dutch Shell Plc, Total SA and Saudi Aramco, Waldron said in an interview in May. Increasing investment and shareholder payouts were higher priorities than carrying out any large-scale acquisition, he said at the time, when he estimated the company had about $1.5 billion in cash reserves.

Technipís financial advisers were Blackstone Advisory Partners and Tudor, Pickering, Holt & Co. Securities.