FMC Technologies agrees to merge with French firm Technip

FMC Technologies Inc. and Technip SA said Thursday that they plan an all-stock merger that will combine the two into a new $13 billion business during a crippling oil bust.

The merger will create TechnipFMC, a company that would have had $20 billion in revenue in 2015. It will combine Houston-based FMC Technologies’ expertise in manufacturing underwater equipment with Paris-based Tenchnip’s broad construction expertise.

It is the latest major deal to reshape an  oil services industry seeking  to survive the bust by merging to cut costs and  offer more essential services to customers. Previously, the industry leader Schlumberger bought Houston’s Cameron International Corp.. The Houston companies Halliburton and Baker Hughes, the second and third largest energy services companies respectively, also attempted a merger, which was scuttled after running into strong opposition from antitrust regulators.

“This is about redefining, reshaping our industry,” said Doug Pferdehirt, President and Chief Operating Officer of FMC, who will be the chief executive of the new company.

Thierry Pilenko, Technip Chairman and CEO, said that the combination would allow more efficient workers laying out and installing undersea infrastructure to work directly with those manufacturing the equipment. “We’re going to work in a much more integrated manner.”

Oil services companies have cut thousands of jobs as they seek to keep costs in line with falling revenues. Houston’s FMC had cut 2,000 workers in early 2015 and continued to trim payrolls as conditions worsened.

Both FMC and Technip have a large presence in Houston. FMC recently consolidated its Houston offices into a new campus northeast of the city at Generation Park, where it expects 1,500 workers to be stationed by the end of the summer. FMC said in April it had 3,200 workers in Houston and 16,400 worldwide. Technip, which has its Houston headquarters off Interstate 10 in the Energy Corridor, has about 2,200 workers in Houston.

FMC and Technip estimated the merger would bring them as much as $400 million in annual cost savings by the end of the decade and said the new company would have one of the strongest balance sheets in the industry.

The two service companies had previously cooperated on a subsea joint-venture called Forsys Subsea. Together, they had sought to lower the cost of offshore production infrastructure by as much as one-third, according to a note to clients by Houston investment bank Tudor Pickering Holt & Co. The success of the merger will depend on the broader combination’s ability to meet or exceed that cost-saving benchmark, analyst told clients in a Thursday morning note.

“[The] Long-term strategic rationale behind deal is clear, but execution will matter more,” Tudor Pickering analysts wrote.

Technip Chairman and CEO Pilenko will move to Executive Chairman of TechnipFMC’s board. Doug Pferdehirt, FMC Technologies’ President and COO, will serve as CEO of TechnipFMC. The company will keep three headquarters in Paris, Houston and London.

The deal is expected to close in early 2017. At that time, shares of Technip stock will be converted into two shares of TechnipFMC and each FMC Technologies shareholder will get one share of TechnipFMC.