TechnipFMC plc, which provides worldwide subsea, onshore, offshore and surface technology services, plans to create two independent, publicly traded companies to enhance the transitioning energy markets.
RemainCo, a technology and services provider, would drive energy development, while SpinCo would be an engineering and construction (E&C) player. The separation, expected to be completed by mid-2020, would be structured as a spin off of the Onshore/Offshore segment and remain headquartered in Paris.
Houston-based FMC Technologies Inc., which was one of the leading subsea service providers in the world and a surface technology provider, agreed to merge in 2016 with Paris-based Technip SA in a deal valued at $13 billion.
The merger established TechnipFMC as the only integrated subsea provider. The Onshore/Offshore business since has expanded its backlog and delivered landmark projects positioning it to, among other things, capitalize on the growing liquefied natural gas (LNG) markets.
“Since the creation of TechnipFMC, we have pioneered the integrated business model for subsea and transformed our clients’ project economics,” CEO Doug Pferdehirt said. After a “comprehensive review,” the board determined it was in the company’s best interest “to create two diversified pure-play leaders. We are confident that the separation would allow both businesses to thrive independently within their sectors, enabling each to unlock significant additional value.”
Separately, the two entities would have specific customer bases, better management focus, backlogs, strong balance sheets and “distinct” investment profiles.
SpinCo, with about 15,000 employees, would be one of the largest E&C pure-plays and would be positioned to capture LNG opportunities, management noted. In addition, the new company would benefit from its market share in the downstream sector, and from growth in biofuels, green chemistry and other energy alternatives.
SpinCo would comprise the Onshore/Offshore segment, including Genesis, which provides front end engineering and design. SpinCo also would include Loading Systems, which makes cryogenic material transfer products, and Cybernetix, a process automation company.
TechnipFMC’s Catherine MacGregor, now president of New Ventures, would be SpinCo CEO. Bruno Vibert would serve as CFO while Marco Villa would be COO.
SpinCo is to be incorporated in the Netherlands, headquartered in Paris and listed on the Euronext Paris exchange.
The RemainCo entity with around 22,000 employees would provide integrated technology, primarily focused on energy services. Pferdehirt would serve as CEO and chairman, while TechnipFMC CFO Maryann Mannen would continue as financial chief of the new entity. RemainCo still would be incorporated in the UK with headquarters in Houston, and it would be listed on the New York Stock Exchange and Euronext.
Reaction from analysts was enthusiastic.
“We couldn’t be bigger fans of this strategic move,” said Tudor, Pickering, Holt & Co. analysts. “Our conversations with clients over the last couple years suggested that there was a subset of the investor community which was never going to be comfortable owning notable E&C exposure within their equity portfolios…”
Wood Mackenzie’s principal analyst Mhairidh Evans noted that the merger of Technip and FMC was “one of the hallmark oilfield service company mergers of the cycle. Going forward, she said the bigger focus would be on midstream and downstream rather than upstream.
“It is a bold move,” Evans said. “We think it’s less about ‘correcting’ something that is not working today, rather with an eye on the longer game ahead. Essentially, the demerger is a proactive positioning move for a longer-term market shift.”
With SpinCo, “It also is a deliberate sidestep away from the upstream cycle, toward the energy transition, which is notable coming from one of upstream oil and gas’ oilfield services’ giants.”
Evercore ISI analysts said the “transformative deal has been on our radar as we surmised that something was afoot” when MacGregor, a key Schlumberger Ltd. executive, joined the company a month ago.
“This was someone who was rumored to be a candidate for Schlumberger’s next CEO at one point and given her background leading a number of its businesses and the Europe & Africa division, it was hard to imagine her not taking an outsized role in some capacity,” Evercore analysts said.
“This move shows that TechnipFMC is a forward-thinking company with the ability to shape the business environment it operates in,”said Rystad Energy’s Audun Martinsen, head of oilfield service research. “The successful integration of FMC Technologies into the Technip organization in 2017 was impressive in its own right, creating a leading subsea entity on the global stage. Then to turn around two years later and manifest the value creation by splitting the company in two, is truly remarkable.”
LNG facilities have historically been an attractive market for TechnipFMC, Martinsen noted.
“With SpinCo, TechnipFMC is seeking now to become a much more focused company...With this move, TechnipFMC will go in the opposite direction” of what would be a top competitor, McDermott International Inc., which acquired CB&I last year.