Technip of France to Buy Stone & Webster

Technip of France said that it has entered into an agreement to acquire Stone & Webster process technologies and the associated oil and gas engineering capabilities from The Shaw Group for a cash consideration of approximately €225 million.

This transaction will enable Technip to:

• Enhance substantially its position as a technology provider to the refining and petrochemicals industries,
• Diversify further its Onshore/Offshore segment, adding revenues based on technology supply,
• Strengthen its relationships with clients and partners worldwide, backed by the Stone & Webster reputation,
• Expand in promising growth areas such as the US, where downstream markets will benefit from the supply of unconventional gas,
• Add skilled resources, notably in research in the US, and in engineering in the US, the UK and India.

Thierry Pilenko, Technip’s Chairman and CEO, commented: “The acquisition of these world-class downstream technologies and high-quality engineering resources fits perfectly with Technip’s strategy to differentiate itself through technology. Technip becomes a major technology provider to downstream markets, adding value to its Onshore/Offshore segment. In addition, we gain access to promising growth areas, including US petrochemical investments driven by low-price shale gas. Furthermore, we are delighted to welcome 1,200 talented people to Technip, to support our growth and our clients’ needs. We continue the process of broadening Technip’s offering of products, services and technologies.”

Acquisition overview and rationale

Technip is acquiring Stone & Webster process technologies and the associated oil and gas engineering capabilities from The Shaw Group. The business operates from five main locations with a particularly strong presence in the US (Houston, Texas, along with Cambridge and Weymouth, Massachusetts), in the UK (Milton Keynes) and in India (Mumbai).

Other sites remain with Shaw, which will also retain all legacy EPC contracts.

The business possesses important and widely recognized best-in-class proprietary technologies and alliances in several key onshore domains around refining and petrochemicals. These complement Technip’s existing technology and alliances in ethylene, hydrogen, fertilizers, polyolefins, and LNG.

The acquired business generates revenues from technology licensing, process design engineering, early-stage and front-end engineering, PMC and the supply of equipment. These revenues, pro forma and annualized, are currently around €220 million. The acquisition therefore roughly doubles the revenues that Technip already generates from this type of activity to around €400 million on a pro forma basis.

Technip will welcome a highly skilled group of 1,200 engineers, researchers and project teams, at a time of strong growth in our industry worldwide. Technip’s execution capabilities in the US and the UK, including Project Management Consulting (PMC) will be particularly reinforced.

Financial aspects

The acquisition is expected to close during the second half of 2012. Technip plans to integrate rapidly and to take the majority of an estimated €15 million of transaction and transition costs this year. The acquisition will be consolidated for only a few months and, excluding the above-mentioned one-off costs, there will therefore be no material impact on Technip’s revenue and operating profit this year. On this basis, Technip’s 2012 financial objectives are unchanged.

The transition costs will drive cost synergies, notably in the areas of premises and IT, of around €7 million on an annualized basis from around a year after close. Purchase price accounting is likely to give rise to some amortizable intangibles. Looking forward, the acquired business can generate margins above those of the Onshore/Offshore segment, as well as having a more robust and lower risk earnings profile.

The cash consideration of around €225 million will be paid out of Technip’s existing cash resources. The transaction is subject to customary price adjustment and closing conditions, including regulatory approvals.

Barclays is acting as financial advisor to Technip and Davis Polk & Wardwell LLP is acting as legal advisor to Technip.

[mappress]
LNG World News Staff, May 22, 2012