September 26, 2016 | Energy | Europe | Ended

Technip / FMC Technologies: Mergers-of-Equals and Negative Arb Spreads

The Technip / FMC Technologies merger-ofequals (MOE) has strong strategic rationale and is considered a ‘merger-of-necessity’ in an era of lower oil prices and a struggling oilfield services industry. While the deal has not been embraced by equity research analysts, the merger continues to have support from both companies’ Boards, customers and, most likely, shareholders, who will participate in the €400m pa of cost synergies after the deal completes. The main question for funds is why the current risk arbitrage spread is negative which in an ordinary merger would imply that the target will most likely be the recipient of a competing bid or a bump from the acquirer.

Contents 1. Reasons for the Negative Spread: Analysts, Earnings, Counterbids 2. Considerations and Anomalies of Mergers-of-Equals 3. Technip Break Price Analysis 4. FMC Technologies Break Price Analysis 5. Risk Arbitrage Break Spread and Financial Valuation 6. Deal Structure and Timing Expectations 7. Risk Arbitrage Trading Thoughts Appendices A. Oilfield Services Industry Overview B. Overview of Technip, FMC Technologies and Forsys Subsea C. Strategic Rationale for the Merger (39 pages)

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