Saipem and Subsea 7 are reportedly close to finalizing merger negotiations, which could reshape the oil services market by creating a monumental company with estimated revenues of 18 billion euros, approximately 18.82 billion dollars. According to Italian newspaper La Repubblica, the merger discussions are reigniting after previous talks were unsuccessful, dating back several years.
The deal would unite two prominent players: Saipem, which is partially controlled by major oil firm Eni and Italian state-owned lender Cassa Depositi e Prestiti (CDP), and Norway-based Subsea 7, led by Chairman Christian Siem. The proposed agreement is likely to be structured as a merger of equals, as both firms aim to bolster their positions within the energy sector.
On February 25, 2024, both Eni and CDP’s boards will meet to deliberate on the potential merger plans. While officials from both companies have refrained from offering immediate comments, the anticipated collaboration waxes optimistic not only for financial growth but also for the firms' operational capacity.
During his tenure, Saipem’s CEO Alessandro Puliti has initiated strategic partnerships, previously collaborating with Subsea 7's subsidiary, Seaway7, to work on floating wind farm development—an area Puliti describes as the “pillar for energy transition,” especially after the substantial financial challenges faced by Saipem due to difficulties on projects earlier. This partnership, set up nearly two years ago, showcased the companies' shared interests and complementary capabilities.
Revisiting the numbers, Subsea 7 reportedly stands at about 4.6 billion euros valuation, slightly less than Saipem's 4.56 billion euros. Post-merger forecasts indicate significant shifts. With both Eni and CDP controlling about 21.19% and 12.82% of Saipem, respectively, their stakes will decrease below 16% if the merger succeeds. A similar reallocation of shares is expected from Subsea 7’s major shareholders.
Historically, just two years prior, Saipem reported considerable financial losses totaling 2.4 billion euros due to myriad project problems, particularly some troubling endeavors within the North Sea. The subsequent business strategy led to returning to profitability, projecting nearly 179 million euros in profit and announcing intentions to reinstate dividend payouts by 2025.
This potential merger not only asserts the recovering trajectories of both Saipem and Subsea 7 but also indicates their commitment to future energy developments amid market shifts toward sustainable sources. Expected to expand their operational capacities, the blended knowledge and expertise could pave ways for enhanced competitiveness—not just within the conventional oil market but also as significant players within renewable energy avenues.
With the increasing need for innovation within the industry, this merger could serve as more than just business growth; it positions Saipem and Subsea 7 as pivotal entities ready to navigate the energy transition. The past failed negotiations have cultivated cautious yet hopeful dialogue this time around, aided by strengthened performances and strategic realignment steered by Puliti’s management.
Overall, should the boards approve this significant strategic shift, the energy sector might witness the creation of an integrated service powerhouse positioned favorably against rising global energy demands. Analysts and stakeholders await the board's decision with bated breath, as developments continue to unfurl.