Geophysical firm CGGVeritas (CGV) Monday said it has entered into an agreement with Fugro to acquire its Geoscience Division, excluding the existing Multi-Client library and nodes businesses. The gross amount of the transaction is 1.2 billion euros ($1.55 billion), to be paid in cash.
Jean-Georges Malcor, Chief Executive Officer of CGGVeritas, said the deal "perfectly fits our strategy, significantly increasing our integrated geology and geophysics, reservoir characterization and development capabilities, along with strengthening our core equipment and acquisition offer in particular with immediate access in marine to high end vessels at a time of market recovery.''
The Netherlands-based Fugro is a service provider for the collection and interpretation of data relating to the earth's surface and sub-surface. It has three divisions: Geotechnical, Survey and Geoscience.
The transaction is expected to be accretive from 2013, enabling steadier cash generation from the integrated Group.
The deal will position CGGVeritas as a fully integrated Geoscience company establishing a leading position in the growing high-end integrated geology and geophysics and reservoir market.
The transaction will also strengthen and extend its existing equipment and acquisition businesses, particularly due to the addition of four high-end 3D vessels.
The agreement also includes strategic partnerships. A Seabed Joint-Venture will be created, focusing on the Seabed acquisition market, which will be 60 percent-owned by Fugro after a payment of 225 million euros to CGGVeritas.
There is also a commercial agreement for CGGVeritas to sell Fugro's existing Multi-Client data, which remains owned by Fugro, and a global strategic technical and commercial mutual preferred supplier agreement.
Around 2500 employees will join CGGVeritas from Fugro and about 230 from CGGVeritas will join the Seabed Joint Venture. Both companies have agreed to honor all existing labor rights and agreement.
For the twelve months ended December 31, Fugro's Geoscience Division, excluding the Multi-Client Library and Ocean Bottom Nodes businesses, generated revenue of $1.0 billion and Earnings before interest, taxes, depreciation and amortization, and stock-based compensation, or EBITDAS, of $161 million.
The deal is expected to be financed with one-third of equity and two-third from debt and Seabed JV share proceeds. CGGVeritas intends to launch a capital increase with a Rights Issue. The debt will be financed by a bridge loan.
The transaction has been approved by both the CGGVeritas and Fugro Boards of Directors. Closing of the deal is targeted before year-end.
The stock gained 1.54 percent to close at 25.79 euros on Friday on a volume of 829,154 shares.
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