Saipem : Saipem 7: reliance on Saipem in terms of share performance that we view as too risky
Saipem and Subsea 7 announced a plan for a merger of equals to create Saipem 7, the world leader in subsea services. While this appears to be an attractive deal, we think that a real risk exists in terms of antitrust approval. A merger parity has been set (6.688 Saipem shares for 1 Subsea 7 share) which means that Subsea 7’s share performance is now correlated to that of Saipem (for which we have identified two risky contracts). The deal is expected to be completed within 18 months, meaning a long period of uncertainty for Subsea 7. We downgrade our rating on Subsea 7 to Neutral (vs Outperform) and adjust our target price to the merger parity, or NOK 171 (vs NOK 250).
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.
Oddo Securities provides securities brokerage and research services. The company offers equity, economic, and derivatives research and credit analysis services. It focuses on insurance, automotive, building materials, pharmaceuticals, telecommunications, information technology, and agri-food industries.
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