While both PGS and CGG declare that the seismic industry is in dire need of rationalization, they are not ready to tie the knot yet. Following previous overtures, notably when CGG acquired a 7.5% stake in troubled PGS last year, CGG has upped the ante with a formal offer to acquire PGS. The offer comprised $800 million cash plus $100 million in CGG shares for the purchase of PGS’ seismic business, operational assets and its multi-client library. The CGG offer was summarily dismissed by PGS—actually, the day before it was officially made! Although PGS ‘still acknowledges the potential benefits of consolidation in the seismic industry, and will continue to work proactively towards an improved industry structure.’
Onex
CGG planned to finance the acquisition through a combination of private equity finance from Toronto-based fund Onex and by senior debt arranged by Citigroup and RBC. Speaking to the investment community, CGG chairman Robert Brunck reiterated CGG’s intention to seek consolidation in the seismic industry, stating that he sees PGS’ rejection as a starting point for future ‘confidential discussions’. Paradoxically, an improving seismic market, with ‘unprecedented’ activity levels this winter, may make the next phase of negotiations difficult. Even if rising activity has failed so far to affect prices, PGS shareholders must see more hope—and value—in the company than they have for a while.
This article originally appeared in Oil IT Journal 2004 Issue # 9.
For more information or to comment on this topic email here.