French oil company Total SA has agreed to acquire Danish conglomerate A.P. Moeller-Maersk A/S's oil unit for $4.95 billion, the latest sign activity is returning to the sector following a three-year slump in oil prices.
In statements released Monday, the companies said Total will also assume $2.5 billion of Maersk Oil's debt.
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The deal is the latest sign of consolidation in the oil-and-gas industry, which is only now coming to grips with a prolonged and painful downturn.
In 2016, Royal Dutch Shell PLC acquired smaller rival BG Group in a roughly $50 billion deal. But speculation that the industry could face another wave of megamergers fell flat.
Total said its acquisition of Maersk Oil will bolster its production by 160,000 barrels a day in 2018 and add significant volumes to its reserve base, primarily in the North Sea. It will make the French oil company northwest Europe's second-largest offshore operator.
The company expects benefits of more than $400 million a year from the deal and said the transaction would immediately boost earnings and cash flow per share. Once the deal is completed, Total said it would consider removing the discount on its scrip dividend to allow shareholders to feel an immediate benefit.
For Maersk, the deal concludes a review process that started over a year ago as it looked to combat one of the worst shipping down-cycles and a historic oil-price rout.
Maersk will retain an interest in the sector through 97.5 million shares in the French energy group, equal to approximately 3.76% of Total. The Danish company's main shareholder, A.P. Moller Holding, could also get a board seat.
Total will take over all decommissioning obligations currently amounting to $2.9 billion and will maintain Maersk Oil's position in the North Sea with strong Copenhagen and Esbjerg bases. Denmark will become the operating hub for Total's combined operations in Denmark, Norway and the Netherlands.
The deal remains subject to approval by Total's shareholders, employee representatives and relevant regulatory authorities.
Maersk shares were up 2.2% early Monday, while those in Total were 0.7% lower.
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(END) Dow Jones Newswires
August 21, 2017 04:16 ET (08:16 GMT)