French oil and gas field surveyor CGG SA has rejected a €1.46 billion ($1.8 billion) offer from fellow French energy services company Technip SA, claiming that the offer did not meet the "conditions to pursue" a deal.
Technip confirmed Thursday, Nov. 20, that it had made an all-cash offer of €8.30 per CGG share, a 27% premium to Paris-based CGG's Wednesday closing price of €6.51. The offer, which was delivered on Nov. 10, values CGG at about $4.5 billion, including its fast-growing net debt of about $2.7 billion.
"Technip would like to enter into a constructive dialogue with CGG's board of directors concerning its project that provides a strong strategic and industrial logic," the La Defense-based bidder said. "This combination would create a unique value proposition in our industry, offering technology, engineering, equipment and project management from the reservoir across the entire production system."
The bid provides further evidence that recent falls in oil prices are proving a catalyst for consolidation amongst energy services companies seeking to cut costs as their client's budgets are slashed. On Wednesday, Houston-based Halliburton Co. (HAL) agreed to pay $38 billion, including debt, for cross-town rival Baker Hughes Inc. (BHI).
A lack of possible cost savings from the combination of Technip and CGG left some analysts questioning the motivation behind the approach.
"CGG is mainly in exploration, Technip is mainly downstream, so there is very little overlap and not much room to cut overheads," said a London-based analyst who asked not to be named. "I wonder how much it [the bid] is down to the influence of the French government seeking a solution for CGG's weak balance sheet."