Two seismic industry leaders, TGS and PGS, have embarked on a merger, valued at US$863.74 million, in a bid to establish a more potent and diversified geophysical entity. The union aims to harness technology and innovation to revolutionize the energy value chain.
The amalgamated company will stand as a force to be reckoned with across various verticals, encompassing multi-client data, streamer data acquisition, ocean bottom node (OBN) data acquisition, imaging, and groundbreaking energy data.
This merger comes three years after TGS’s unsuccessful attempt to acquire PGS’s seismic library, raising discussions among analysts about the generous payment to PGS shareholders.
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One of the primary objectives of this merger is to capitalise on economies of scale, with anticipated annual cost synergies exceeding US$50 million. Both companies enjoy strong institutional shareholder support from major banks.
Following the all-stock deal, PGS shareholders will receive 0.06829 TGS ordinary shares for each PGS share they hold. This arrangement will result in TGS and PGS shareholders owning approximately two-thirds and one-third of the combined entity, respectively. Shares in TGS experienced a substantial uptick during morning trading in Oslo, while PGS also saw a notable increase in value.
This merger is expected to mitigate supply chain risks, enhance efficiency, and offer an enhanced value proposition to clients. The combined entity will provide a global seismic library, a fleet of 3D data acquisition vessels, a vast network of OBN nodes, and robust imaging services.
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Furthermore, the company anticipates significant growth opportunities in the new energy sector, including carbon capture and storage (CCS) and offshore wind technologies.
TGS Chief Executive Officer (CEO) Kristian Johansen expressed excitement about the merger, emphasizing the benefits of scale, technology, and service quality for clients. PGS CEO Rune Olav Pedersen echoed these sentiments, highlighting the value it brings to all stakeholders.
The merger is contingent on several conditions, including due diligence, regulatory approvals, and approval by extraordinary general meetings in both TGS and PGS, with at least a two-thirds majority.
SpareBank 1 Markets and Pareto Securities are serving as financial advisors, and Schjodt and Advokatfirmaet BAHR are acting as legal advisors to TGS and PGS, respectively. The full merger plan is anticipated to be published in October 2023.
