Subsea 7 (Buy, TP: NOK120.00) - All about synergies
From an industrial point of view, we continue to believe that a potential combination with McDermott would make sense for Subsea 7. With its move yesterday, we believe Subsea 7 is looking to drum up interest from McDermott shareholders and the next steps will depend on the outcome. Assuming estimated cost synergies in the USD140–175m range being split 50/50 between McDermott and Subsea 7 shareholders, we see potential for Subsea 7 to pay USD8.0–8.4 per McDermott share, without putting any value on revenue synergies and strategic elements. In such a scenario, we estimate 50% of the cost synergies would benefit Subsea 7 share-holders by NOK7–10/share. Maintain BUY, NOK120 TP.Subsea 7 is a provider of seabed-to-surface engineering, construction and services contractor to the offshore energy industry. Co. provides products and services required for subsea field development, including project management, design and engineering, procurement, fabrication, survey, installation, and commissioning of production facilities on the seabed and the tie-back of these facilities to fixed or floating platforms or to the shore. Co. also provides products and capabilities to deliver full Life of Field services to its clients. Through its i-Tech Division, Co. provides remotely operated vehicles and tooling services to support exploration, production and drilling activities.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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