TechnipFMC has announced that it will split into two separate publicly-traded companies (currently dubbed SpinCo and RemainCo). This comes less than 3 years after the merger of Technip and FMC in January 2017.
Production v E&C
They are not quite being split in the same way that they came together. The Engineering & Construction arm (primarily the old Technip business) is being spun off from the remaining business that will concentrate on production systems (primarily the old FMC business). However Loading Systems which supplies loading arms for LNG will be part of SpinCo. It was originally part of FMC.
SpinCo will have its head office in Paris and will be listed on the Euronet Paris Exchange. RemainCo will be based in Houston and have listings on the NYSE and the Euronet Paris Exchange.
SpinCo will have revenues of $6 billion and 15,000 employees. RemainCo will have revenues of $7 billion and 22,000 employees. The combined business currently has a market cap of $10 billion.
The current CEO, Doug Pferdehirt and current CFO, Maryann Mannen, will transfer to RemainCo. During a conference call today the CEO said;
“There are very few synergies between upstream and downstream. We are seeing the beginning of a shaping of our industry. We believe that what we are creating, others will follow. When you over-integrate, the customer can see you as greedy. We integrate where it clearly adds value to the customer.”
At the time the deal was announced in May 2016, then CEO of Technip, Thierry Pilenko, said;
“We have complementary skills, technologies and capabilities. Together, TechnipFMC can add more value across Subsea, Surface and Onshore/Offshore, enabling us to accelerate our growth.”
Integration costs $231m, Break-up costs ??
The company spent $231 million on integration costs between 2016 and 2018. Since the merger the stock has lost about a third of its value. That’s considerably better than the PHLX Oil Services index that has lost about 66% in that time, but much worse than the S&P 500 that has gained about a third.
I wonder how much it will cost to separate the businesses?