TGS to buy Wavefield in seismic tie-up

OSLO (Reuters) - Norwegian seismic surveyor TGS-Nopec (TGS.OL) is to buy rival Wavefield Inseis ASA WAVE.OL in a $1.16 billion all-share deal to create a new powerhouse in the oil and gas industry services sector.

TGS will issue new TGS shares representing 38 percent of the combined group, offering Wavefield shareholders a premium of more than 8 percent based on Friday's closing share prices.

"We believe that with this combination, we are creating an extremely powerful force in our sector for the future," TGS-Nopec Chief Executive Hank Hamilton told a news conference.

Hamilton added that the combination would give TGS much needed access to more high-end vessels, boosting the fleet to 13 vessels TGS' current seven and reinforcing the Wavefield business with data-processing capabilities from TGS.

The combination should create a firm better able to compete globally with bigger rivals such as market leader CGGVeritas (GEPH.PA), Schlumberger's (SLB.N) WesternGeco seismic unit and Norway's Petroleum Geo-Services (PGS) (PGS.OL).

Analysts said the companies have complementary strengths, and shares in both jumped.

"The combined company will be in a better position to grow in the current market environment than the two alone," ABG Sundal Collier analyst Richard Jansen said. "It will remedy TGS' lack of vessel capacity and fix Wavefield's problem of lack of multi-client exposure and in-house data processing."

Carnegie analyst John Olaisen said: "Both (stocks) are trading at a discount to peers, that should now disappear."

Wavefield Inseis shareholders will get 0.505 new TGS share for each Wavefield share they own.

The deal values Wavefield Inseis' 128.4 million shares at about 6.8 billion crowns ($1.16 billion) based on TGS's Friday closing price of 105 crowns, and offers an 8.2 percent initial premium to Wavefield's Friday closing of 49 crowns.

Wavefield Inseis shares rose as high as 56.25 before paring gains to 54.50 crowns by 1330 GMT, still up 11.2 percent and topping the initial 53.025 crowns value of TGS-Nopec's offer. TGS shares traded up 2.9 percent at 108 crowns, boosting the value to Wavefield owners.

BIGGER SEISMIC PLAYER

"We believe this will be accretive to earnings per share and highly accretive to cashflow before taking into account any of the synergy effects," said Hamilton, who will continue to be CEO of the merged group whose market cap is seen above $3 billion.

He declined to give a figure for total synergies but said revenues from external data-processing could rise to $50 million to $60 million next year from around $30 million now.

Hamilton said other synergies would depend on how the group allocates its fleet to the multi-client and contract businesses. The multi-client business involves selling data on a non-exclusive basis to several customers as opposed to exclusive contract projects for individual clients.

Oil companies use the data to decide where to drill for oil and gas.

The combination would also give TGS a foothold in a technology called "wide azimuth" which enables seismic surveyors to check below salt layers such as found in large parts of the Gulf of Mexico, TGS and Wavefield executives said.

The firms aim to complete the deal by the end of November.

In combination with the takeover, TGS-Nopec plans to launch a share buyback of up to $150 million, the companies said.

The merger was unanimously approved by the boards of directors of both firms. The firms said that Wavefield shareholders with about 25 percent of the stock backed the deal.

The deal depends on 2/3 majority approval by extraordinary general shareholder meetings of both firms, expected to be held in mid-September, customary regulatory approvals, completion of due diligence and agreement of a final merger plan, they said.