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TechnipFMC Split a “Bold” Move

file photo courtesy of TechnipFMC
file photo courtesy of TechnipFMC

By The Maritime Executive 2019-08-27 20:38:33

TechnipFMC has announced what industry analysts are calling a “bold” move to demerge.

The 2017 merger of Technip and FMC Technologies created a new subsea leader and established TechnipFMC as the only fully-integrated subsea provider, but the company's Board of Directors has now unanimously approved its plan to separate into two independent, publicly traded companies. RemainCo, a fully-integrated technology and services provider, will continue to drive energy development; and SpinCo, a leading engineering and construction (E&C) player, is poised to capitalize on the global energy transition, says TechnipFMC. The two companies would have distinct and expanding market opportunities and specific customer bases.

The transaction is expected to be structured as a spin-off of TechnipFMC’s Onshore/Offshore segment to be headquartered in Paris, France, and the separation is expected to be completed in the first half of 2020.

SpinCo 

With approximately 15,000 employees, SpinCo would be one of the largest E&C pure-plays and will be uniquely positioned to capture LNG opportunities. The new company will benefit from its leadership position in the downstream market as well as future growth opportunities in biofuels, green chemistry and other energy alternatives. The company would comprise the Onshore/Offshore segment, including Genesis – a leader in front end engineering and design. SpinCo would also include Loading Systems, a leader in cryogenic material transfer products, and Cybernetix, a technology leader in process automation, that have historically been a part of the Surface Technologies and Subsea businesses, respectively.

Catherine MacGregor, who currently serves as TechnipFMC’s President, New Ventures, will serve as Chief Executive Officer of SpinCo. Bruno Vibert will serve as Chief Financial Officer and Marco Villa will serve as Chief Operating Officer. SpinCo will be incorporated in the Netherlands with its headquarters in Paris and listed on the Euronext Paris exchange. 

RemainCo 

With approximately 22,000 employees, RemainCo would be a fully-integrated technology and services provider supporting clients in the delivery of unique, integrated production solutions. As a standalone company, RemainCo will be the largest diversified pure-play in the industry. Doug Pferdehirt, Chairman and Chief Executive Officer of TechnipFMC, and Maryann Mannen, Executive Vice President and Chief Financial Officer of TechnipFMC, will continue to serve in their roles following the separation. RemainCo will remain incorporated in the United Kingdom with headquarters in Houston and listed on both the NYSE and Euronext Paris exchange.

Wood Mackenzie View

Commenting on the move, Mhairidh Evans, principal analyst, at Wood Mackenzie, said: “In 2017 Technip and FMC Technologies completed one of the hallmark oilfield service company mergers of the cycle. The business plans to split in the first half of 2020 – but not back into Technip and FMC - rather into ‘upstream’ and ‘mid/downstream.’

“The upstream company, termed RemainCo for now, will be, in essence, the legacy FMC Technologies’ equipment and services business, plus Technip’s subsea vessels and subsea, umbilical, riser and flowline (SURF) manufacturing business. This will also include the surface wellhead business. We believe that the subsea sector is a growing market.

“The mid/downstream company, termed SpinCo, will be an engineering and construction business, focusing on LNG, downstream and petrochemicals, and will build on the legacy Technip position in those areas.”

She added: “It is a bold move. We think it’s less about ‘correcting’ something that is not working today, rather with an eye on the longer game ahead. Essentially, the demerger is a proactive positioning move for a longer-term market shift.

“The demerger provides focus and flexibility for each of its divisions, which were already fairly distinct. For example, we’d expect the subsea division to build on its market leadership – perhaps by considering other acquisitions or strategic directions that the wider TechnipFMC couldn’t support.

“The two new companies will have different appeal for investors. We think the market will like RemainCo, the more pure-play upstream company, which is already a market leader in subsea. The mid/downstream company, SpinCo, has a longer-term horizon, and is less capital- and asset-intensive than its upstream counterpart. It’s also is a deliberate sidestep away from the upstream cycle, towards the energy transition, which is notable coming from one of upstream oil and gas’ oilfield services’ giants.”