Featured Company News - Total S.A. Acquires A.P. Moller-Maersk's Maersk Oil in a Stock and Debt Transaction
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LONDON, UK / ACCESSWIRE / August 23, 2017 /Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Total S.A. (NYSE: TOT), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=TOT. The Company announced on August 21, 2017, that it has agreed to acquire 100% of the equity of Maersk Oil & Gas A/S ("Maersk Oil"), a wholly owned subsidiary of A.P. Moller – Maersk A/S ("APMM"). Total has acquired Maersk Oil from container shipping and logistics group, APMM. The stock plus debt deal valued at approximately $7.45 billion. The Boards of Directors of both Total and APMM have approved the deal. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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The acquisition of Maersk Oil is one of the biggest transactions done by the Paris, France based oil and gas company Total in recent times. Copenhagen, Denmark based Maersk Oil has been in the oil and gas business since 1962 and has production assets in Denmark, UK, Norway, Kazakhstan, US Gulf of Mexico, and Algeria. It also has ongoing exploration and development activities in countries like in Angola, Kenya, Brazil, Kurdistan Region of Iraq, etc. For FY16, the Company had an entitlement production of 313,000 boe/d.
As per the terms agreed by both Companies, Total will pay APMM $4.95 billion in Total's stock. Accordingly, Total will issue 97.5 million of shares to APMM which represents 3.75% stock holding in Total. The valuation has been derived based on Total's average share price 20 business days before the signing of the deal, i.e. August 21, 2017. Total has also agreed to assume Maersk Oil's short-term debt of approximately $2.5 billion for which it will pay an interest of 3% p.a. of the enterprise value from June 30, 2017, and till completion of the transaction. Total will also take over all the decommissioning obligations valued approximately $2.9 billion.
The transaction is expected to close in Q1 2018, however, it will be effective as on July 01, 2017. The transaction is subject to shareholders and regulatory approvals as well as other closing conditions.
Way forward on completion of the acquisition
Total has offered A.P. Moller Holding A/S (the main shareholder in APMM) a possible seat on its Board. Total's Board is considering the removal of discount offered on the scrip dividend so that Total's shareholders can benefit from accretive cash flows and earnings resulting from the acquisition of Maersk Oil.
Maersk Oil will become part of Total and latter will acquire Maersk Oil's entire organization, portfolio, obligations, and rights with minimal pre-conditions. All planned development schedules and investments in strategic and sanctioned projects will be upheld.
The divestment of Maersk Oil allows APMM to exit from the oil and oil related business so that it can focus on becoming an integrated transport & logistics Company. The sale of the Maersk Oil will allow APMM to strengthen its capital structure.
Sharing his views of the acquisition Patrick Pouyanne, Chairman and CEO of Total, said:
"The combination of Maersk Oil's North-Western Europe businesses with our existing portfolio will position Total as the second operator in the North Sea with strong production profiles in UK, Norway and Denmark, thus increasing exposure to conventional assets in OECD countries."
"By adding such a portfolio of growing conventional offshore North Sea assets, we confirm our strategy for value creation of, on the one hand, playing to our core strengths in order to grow further and, on the other hand, to constantly seek to lower our break-even by delivering significant synergies. This transaction will deepen and accelerate this strategy significantly, as Total will become a 3 Mboe/d major by 2019 to the benefit of all Total shareholders."
Søren Skou, CEO of APMM stated:
"In determining the best future ownership structure for Maersk Oil, it has been imperative for us that the capabilities and assets created in Maersk Oil continue to be developed, and that long-term investments are upheld, especially in the Danish part of the North Sea. The valuation of Maersk Oil and Total's commitment is a testament to the quality and standing of Maersk Oil. In addition, the agreement will strengthen the financial flexibility of APMM and free up resources to focus our future growth on container shipping, ports and logistics."
Benefits of the transaction
The acquisition is highly beneficial to Total as it increases the Company's competitiveness and value in many core areas as well as result in synergies due to various overlap in businesses. The transaction is expected to accretive to the earnings and cash flows of Total immediately. The merger is expected to result in annual savings of over $400 million from 2020 due to various operational, commercial, and financial synergies. The acquisition adds approximately 1 billion boe of 2P/2C reserves to Total's existing reserves, nearly 85% of which are in OECD countries. Total would increase its liquids production capacity with the acquisitions, of which 160 kboe/d would be in 2018 which would grow to 200 kboe/d by the early 2020's.
The acquisition is mainly helping Total's outlook for North West Europe as the deal pushes Total to become the second largest operator in the NW Europe offshore region. The transaction allows Total to expand and strengthen its existing North Sea offshore producing business in UK and Norway. The acquisition also allows Total to take over Maersk Oil's investments and assets in this region. Total would also gain access to new production hub as a result of Maersk Oil's operatorship and 31.2% ownership of the DUC producing assets in Denmark with estimated net production in 2018 at 60 kboe/d. Moreover, the transaction will help Total in consolidating, strengthening and expanding its business where Maersk Oil's businesses are located globally.
Last Close Stock Review
On Tuesday, August 22, 2017, the stock closed the trading session at $51.06, rising 1.41% from its previous closing price of $50.35. A total volume of 2.57 million shares have exchanged hands, which was higher than the 3-month average volume of 1.40 million shares. Total S.A.'s stock price advanced 2.92% in the last one month and 6.15% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 0.18%. The stock is trading at a PE ratio of 17.47 and has a dividend yield of 5.41%. The stock currently has a market cap of $127.26 billion.
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