The world’s second largest energy services group, Halliburton, has announced it may bid for deep sea research firm Expro despite Expro’s agreed takeover by the private equity arms of Goldman Sachs, Candover Partners and Alpinvest.
The private equity firms, joined under a specially created investment vehicle named Umbrellastream, announced a £14.25 per share bid, valuing Expro at £1.8bn. The board accepted this offer but did not state a deadline for competitive bids. This gives Halliburton several weeks to carry out due diligence and Expro’s shares have shot up to £15.10 amid hopes of a rival bid.
Expro has pioneered a technology allowing oil wells to be fixed from ships instead of oil rigs, which are expensive to lease and take a long time to travel. With the increasing interest in deep sea exploration paying off for Petrobras and others, Expro’s services will be in high demand. Peter Hitchens, an analyst with Seymour Pierce, said: “…you’ve got huge potential with Expro’s rigless technology. They are the market leader and private equity is realising how much cash these guys are going to produce.”
Oil rich countries like Saudi Arabia usually hire firms like Shell or BP to explore in exchange for production sharing agreements (PSA’s). These PSA’s allocate a huge share of any discoveries to the oil company. To stop this loss, countries are now dealing directly with firms like Halliburton, who will test for oil and leave the state in charge of any discoveries, which they can then offer to Shell or BP at much higher prices. Halliburton is thus expanding horizontally to provide as many services as the large oil firms, but with much better agreements.
Mergers 101 states Halliburton would gain more from the merger because it operates in the same industry and can create synergies by sharing resources. It should thus bid higher than the private equity firms in the hope that expansion will help outperform competing firms like Schlumberger, the world’s largest energy services group.
British private equity firm Candover has significant experience in oil and gas services, having bought and sold stakes in Vetco International and Wellstream. Its previous offer for Expro was rejected for being too low, and the new higher offer suggests Umbrellastream is seriously interested in buying the firm.
A buyout of Expro looks almost certain, and with the open timeframe other firms like PE Group Kohlberg Kravis Roberts or oil services providers Weatherford of the US and Technip of France may yet express interest. Oil Energy Money will keep you updated, but please write in with your comments and any tips at
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Related Articles:
A Reuters piece analysing the near £1bn financing required for Umbrellastream’s bid
Seeking Alpha’s sneak peek at Halliburton’s earnings report due Monday the 28th. Long story short: Halliburton is doing very well.
[...] by Candover and Goldman Sachs, to proceed with an offer of £1.81bn. Oil Energy Money covered Halliburton’s initial offer but believes a take-over by Umbrellastream is best for all all [...]
By: End Of Halliburton & Expro Affair Leaves Investors Broken-Hearted « Oil Energy Money on June 23, 2008
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