Exxon and Petrobras Urge Antitrust Review of $4.6 Billion Merger

ExxonMobil has formally requested that Brazil’s antitrust regulator scrutinize the proposed merger between Subsea7 and Saipem, asserting that it could significantly diminish competition within the deepwater offshore drilling sector. The oil giant’s petition, bolstered by support from Brazilian state-controlled oil company Petrobras and oilfield service provider TechnipFMC, highlights concerns over potential price increases resulting from the merger.

According to documents reported by Bloomberg, the petitioners specifically pointed to critical segments such as subsea umbilicals, risers, flowlines, and pipe-laying vessels as areas where competition would be adversely affected. ExxonMobil emphasized that the merger could limit options for its operations and other customers, reducing them to a single relevant supplier in the deepwater pipeline installation market.

TechnipFMC echoed these concerns, stating that the merger would create challenges for other companies striving to compete effectively with a combined Subsea7 and Saipem entity. Petrobras also weighed in, indicating that nearly 50% of the vessels utilized for its offshore drilling activities are owned by either Saipem or Subsea7, which would curtail its choices among oilfield service providers in the future.

Details of the Merger and Its Implications

Earlier this year, Subsea7, based in Norway, and Italy’s Saipem announced their intention to merge in a deal valued at over $4.6 billion. The new entity, expected to be called Saipem7, is projected to generate revenues of approximately €21 billion (around $24.76 billion) and report earnings before interest, taxes, depreciation, and amortization (EBITDA) exceeding €2 billion (about $2.4 billion). Additionally, the combined backlog of projects is estimated to reach €43 billion, or around $50.7 billion.

The shareholders of Subsea7 and Saipem are scheduled to cast their votes on the merger during separate meetings on Thursday, March 7, 2024. Just days prior, the Italian government granted its approval, marking a significant step toward finalizing the agreement. The merger is anticipated to close in the second half of next year, pending successful shareholder votes and regulatory reviews.

The potential impact of this merger has raised alarms among key industry players. Market observers note that the consolidation of two significant entities in this sector could reshape competitive dynamics, leading to increased operational costs for companies reliant on their services. As such, Exxon’s petition to Brazil’s antitrust authority underscores the heightened scrutiny surrounding the transaction.

In summary, as the proposed merger between Subsea7 and Saipem moves forward, the responses from industry stakeholders reveal deep concerns about competition and pricing in the offshore drilling market. With significant votes and regulatory decisions looming, the future of this merger remains uncertain, reflecting ongoing tensions in an evolving energy landscape.