Wavefield seeks to jettison TGS-Nopec merger

By Aasa Christine Stoltz

OSLO (Reuters) - Norwegian seismic surveyor Wavefield Inseis WAVE.OL said on Thursday it would ask shareholders to end a planned merger with peer TGS-Nopec (TGS.OL), knocking both companies' shares sharply lower.

Shares in TGS plunged as much as 9.5 percent, and was down 9.2 percent at 79.60 crowns by 1053 GMT, giving the company a market value of about $1.57 billion. Shares in Wavefield sank as much as 6.7 percent to 41.06 crowns, valuing it at about $986.4 million. The Oslo bourse benchmark index .OSEBX was down 1.9 percent.

TGS launched a formal process last month, which has led to arbitration, to resolve a dispute over the takeover put on ice by Wavefield after an unexpected TGS profit warning in October, knocking the deal's value for Wavefield shareholders sharply.

"The general meeting deems that the terms for completing the merger have not been fulfilled," Wavefield Inseis ASA said in a statement before an extraordinary general meeting of shareholders to be held later on Thursday.

Analysts said TGS would be worse off than Wavefield if the merger, originally valued at $1.2 billion, were cancelled.

"TGS will be in a weaker position than its competitors without Wavefield, and will be a less interesting investment candidate," said analyst Richard Jansen at ABG Sunndal Securities.

"This will be destructive for both companies. But looking a bit further, the next two years, TGS has more to lose than Wavefield," analyst Morten Nystroem at Kaupthing Norge said.

Jansen said Wavefield shares are now cheap, considering the company on a standalone basis.

"If they manage to get out of this deal, the shares will rise," he said, estimating that a final decision on what happens next will not be reached for three to six months.

"In the meantime, both companies' shares will probably not be very interesting as an investment," Jansen said.

Both Wavefield and TGS are suppliers of seismic surveys to the oil and gas industry. While TGS leases its seismic vessels, Wavefield has a fleet of seven vessels, equipped with seismic survey equipment.

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Some Wavefield shareholders suspected TGS knew it had missed market estimates when voting for the merger. Wavefield then asked for an independent review of what caused TGS's revenue shortfall in the third quarter and urged TGS to make a "substantive improvement" in the merger terms.

"TGS has rejected Wavefield's request for any further review and any proposal for a substantive improvement in the terms of the merger," Wavefield said.

"The board of directors of Wavefield, after input and deliberation with large shareholders, is instructed to prevent the completion of the merger and seek a termination of the merger either through an amicable agreement or an arbitration process according to the merger plan," it said.