By Inti Landauro and Selina Williams
PARIS--France's Technip SA has made a preliminary takeover offer
of EUR1.46 billion ($1.83 billion) in cash for smaller French
oil-services company CGG, a sign of accelerating consolidation in
the sector as falling oil prices have crimped spending by big oil
groups.
CGG, a Paris-listed specialist in exploration equipment and
services, said it has rejected the offer. "Conditions to pursue
[the approach] weren't met," the company said in a statement
Thursday. "The company isn't for sale," a spokesman added.
Technip said it would break up CGG, selling its seismic-studies
unit which accounted for about 60% of the company's $3.77 billion
in revenue last year.
The announcement of Technip's approach CGG comes just days after
U.S. giant Halliburton Co. announced plans to buy smaller rival
Baker Hughes Inc. in a deal valued at $34.6 billion, prompting
speculation that more deals in the sector were in the offing.
The industry's main players are rushing to buy smaller rivals to
As AThe preoffset the effects of falling oil prices on their
business. Oil-services companies typically provide equipment such
as rigs, drill parts and tools but can also undertake the
engineering for pipelines and projects.
As oil prices have fallen to below $80 a barrel from more than
$100 a barrel earlier this year, major oil companies have shelved
expansion plans for multibillion-dollar projects and shed
operations with thin profit margins.
Technip provides an array of services from offshore drilling
equipment to oil refining, while CGG focuses on seismic studies and
other techniques to help energy companies locate oil and gas
reserves. The company also makes equipment.
The combined group would employ around 50,000 people with
revenue of around EUR13 billion.
Technip, which said it first approached CGG on Nov. 10, has
offered EUR8.3 a share in cash, a premium of 27% over CGG's closing
share price Wednesday.
CGG shares shot up, but at EUR8.23, they were trading slightly
below Technip's offer price.
Shares in Technip fell sharply. The stock was down 7.3% in late
trading.
Some analysts questioned the logic of the deal given CGG's
relatively weak financial position, declining operating
profitability, and the absence of significant potential cost
savings.
"I don't think, at this point, Technip's shareholders have
anything to win," said Jean-Pierre Dmirdjian, an analyst at
London-based brokerage house Liberum.
Providers of seismic studies and other exploration services tend
to be first to suffer when oil prices fall as exploration budgets
are often the easiest ones for oil and gas producers to cut.
CGG has posted net losses in four over the past five years and
analysts who follow it expect a current restructuring plan won't
restore it to profitability until 2016.
Mr. Dmirdjian said he suspects the French government, which has
a 7.7% stake in Technip and 10.6% stake in CGG, would like to see
the tie-up happen. "I feel the government is very involved in this
operation."
French government spokesman Stephane Le Foll declined to comment
on Thursday on the merger.
Write to Inti Landauro at inti.landauro@wsj.com
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