CGGVeritas (Paris:GA) (NYSE:CGV) announced today that it has entered into an agreement with Fugro to acquire Fugro’s Geoscience Division, excluding the existing Multi-Client library and nodes businesses.
With this transformative agreement, CGGVeritas will become a fully integrated Geoscience company establishing a leading position in the fast growing high-end integrated geology and geophysics and reservoir market. The transaction will also strengthen and extend its existing equipment and acquisition businesses, in particular with the addition of four high-end 3D vessels.
The agreement also includes strategic partnerships which will benefit from the leading positions both parties have in their respective markets:
- The creation of a Seabed Joint-Venture, a focused global leader in the rapidly growing Seabed acquisition market, which will be 60%-owned by Fugro after payment of €225 million to CGGVeritas.
- A commercial agreement for CGGVeritas to sell Fugro’s existing Multi-Client data, which remains owned by Fugro.
- A global strategic technical and commercial mutual preferred supplier agreement.
The gross amount of the transaction is €1.2 billion, to be paid in cash and expected to be financed with 1/3 of equity and 2/3 from debt and Seabed JV share proceeds, structured to maintain our current credit ratings. As soon as possible, CGGVeritas intends to launch a capital increase with a Rights Issue. The debt will be financed by a bridge loan. The transaction is expected to be accretive from 2013 and enable steadier cash generation from the integrated Group.
The transaction has been approved by both the CGGVeritas and Fugro Boards of Directors.
The completion of the transaction is subject to mandatory anti-trust clearances, work councils consultation processes and other customary conditions. Closing is targeted before year-end.
Jean-Georges Malcor, Chief Executive Officer of CGGVeritas said:
“I am very enthusiastic about the transaction. It perfectly fits our strategy, significantly increasing our integrated geology and geophysics, reservoir characterization and development capabilities, along with strengthening our core equipment and acquisition offer in particular with immediate access in marine to high end vessels at a time of market recovery. It also extends our service range to new customers and additional markets such as airborne. The acquired business of Fugro’s Geoscience Division fully complements our products and services and enables us to better serve our clients across the complete exploration to production value chain.
Fugro’s technology and talented people are an excellent addition to our team and I look forward to welcoming them to CGGVeritas. With an expanded technology portfolio, a stronger industry position and our combined expertise, we will create an integrated company with leading capabilities in geoscience, equipment, and acquisition.
Moreover, the agreement creates a strategic partnership that combines the strengths of CGGVeritas and Fugro, including the establishment of a new Seabed acquisition Joint Venture that immediately becomes a focused market leader in this very promising and dynamic market segment.
This step change transaction is expected to accelerate profitable growth, cash generation and increase the resiliency of the business. The proposed financing structure will enable our shareholders to fully benefit from this transaction which is expected to be accretive from 2013.
Transformed into an integrated Geoscience company, CGGVeritas will be well positioned to deliver greater value to our clients and shareholders and provide more opportunities for our employees.”
Strategic Rationale of the Agreement
CGGVeritas establishes a leading position in the high-tech integrated geology & geophysics and reservoir characterization market
…while strengthening and extending its existing businesses
- A major step forward in field development and in reservoir capabilities, with strong recognized brands and immediate access to new clients
- An accelerated move to a less cyclical business and low capital intensive geoscience consulting services
- The addition of high-tech reservoir characterization and modeling software and services, complementing the Hampson-Russell business
- Provision of high-end integrated solutions from exploration to production
…and benefiting from synergies
- Immediate access to high-end Marine vessels at a time of market recovery. A sound alternative to new builds while keeping industry capacity constant
- Creation with our partner Fugro of a global leader in the rapidly growing Seabed Acquisition services market
- An increased Multi-Client footprint through access to new libraries and reinforced marketing teams
- A complementary position in equipment with the De Regt products
- The addition of high skilled personnel where expertise is a key success factor
- The addition of acquisition services businesses: Airborne, Marine EM, Marine Magnetics & Gravity
CGGVeritas and Fugro Employees
- Scale savings and incremental productivity of the global fleet
- Technology and commercial leverage across the geosciences
- Additional sales expected from the preferred supplier agreement
The transaction involves highly skilled employees located around the world. Approximately 2500 employees will join CGGVeritas from Fugro and approximately 230 from CGGVeritas will join the Seabed Joint Venture. Both parties have agreed to honor all existing labor rights and agreements. Applicable consultations with the employee representation groups will be undertaken by both parties.