Subsea7 and Saipem Join Forces: A Shake-Up in the Energy Services Sector

Background

In a significant move within the energy services sector, Norway’s Subsea7 and Italy’s Saipem issued a Memorandum of Understanding on Feb 24th 2025 to merge. Subsea7 and Saipem are both leading companies that provide subsea engineering and construction services in the offshore energy sector, with Saipem also specialising in conventional offshore activity and onshore projects. A binding merger agreement is expected to be reached in mid-2025 and be fully completed by 2026 subject to regulatory approvals, creating a new entity, Saipem7.

Merger Overview

Subsea7 and Saipem are similar in size, each having a market capitalization of around €4 billion. A merger of equals with a 50-50 ownership split of Saipem7 will be achieved by Subsea7’s shareholders receiving 6.688 shares of Saipem for each Subsea7 share. Additionally, a dividend of €450 million will be paid to shareholders by Subsea7. The new entity is expected to generate over €20 billion in annual revenue. Synergies arising from increased efficiency in operations are expected to lead to a yearly saving of €300 million after 3 years of the merger, with a one-off integration cost of €270 million.

Rationale

A merger between Subsea7 and Saipem had been explored before in 2019, but an agreement was not reached. Given increasing uncertainties with the energy sector as the industry grapples with energy transition, it is not a surprise that Subsea7's CEO John Evans highlighted how the broader macroeconomic environment influenced the merger, enabling both companies to better respond to these challenges by expanding their geographic footprint and capabilities.

The major driver behind the merger is the complementary nature of the two companies' operations. While operating in the same sector, Subsea7 and Saipem primarily employ different pipeline installation methods, each suited for offshore projects at varying water depths. A combination of 60 fleets owned by both companies will allow Saipem7 to offer a comprehensive line of service to clients, providing engineering and construction expertise and capability in projects ranging from ultra-shallow water to ultra-deepwater, obtaining a key competitive advantage in the industry. 

Potential Concerns

Both companies have faced their share of operational challenges in recent years. Saipem had to undergo a restructuring in 2022, partly due to taking on multiple zero-margin onshore projects that are still ongoing. On the other hand, Subsea7 is more involved in the offshore wind sector which has proven to be volatile and risky in recent years, with adverse weather conditions and mechanical challenges causing delays in key projects in the Netherlands and Taiwan. Whether Saipem and Subsea7 can seamlessly integrate their operations remains to be seen.

As with any large-scale merger, antitrust concerns arise. However, this is unlikely to be a major issue given that Subsea7 and Saipem primarily operate in different regions, with Subsea7 focusing mainly on Brazil and the Gulf of Mexico, while Saipem is more active in the Asia Pacific and Middle East regions. Saipem’s CEO, Alessandro Puliti, stated the combined company would not acquire an overly significant market share, capturing only 20% in the Middle East and Latin America, and 22% in the North Sea. Further information on regulatory approvals is expected soon.

Conclusion

The potential merger of Subsea7 and Saipem is expected to reshape the offshore energy services sector. If the companies can seamlessly integrate, the synergies arising from their complementary nature are undeniable. Considering the uncertainties surrounding the energy transition, it will be worth following if this news sparks further mergers or acquisitions within the energy services sector.

References and Further Reading

“Italy's Saipem, Norway's Subsea 7 to create energy services leader” (Reuters)

“Proposed Combination of Saipem and Subsea7” (Saipem)

“Saipem Annual Report 2024” (Saipem)

“Saipem Is Said to Explore $4.5 Billion Survival Package” (Bloomberg)

“Seaway 7 incurs extra costs, makes heavy weather of Dutch and Taiwanese projects” (Riviera)

“Subsea7 Annual Report 2024” (Subsea7)

“TechnipFMC chief: proposed Saipem-Subsea7 merger is ‘good outcome’ for offshore industry” (UpStream)