Continental Focus, International Reach

TGS-NOPEC to Acquire Spectrum

Monday, May 6, 2019

TGS-NOPEC Geophysical Company has agreed on the principle terms for the acquisition of Spectrum, creating a leading provider of 2D and 3D seismic data.
The transaction is expected to be completed as a statutory merger pursuant to Norwegian corporate law between TGS and Spectrum, with merger consideration to Spectrum shareholders in the form of 0.28x ordinary shares of TGS for each Spectrum share, in addition to a cash consideration of $0.27 multiplied by the Exchange Ratio subject to the transaction closing after the ex-date for the TGS dividend payable in Q3 2019.
Definitive merger documents are expected to be entered into during May, with closing of the transaction expected during the third quarter of 2019 following shareholder approvals in EGM and regulatory clearance.
The transaction will enhance TGS’ position as a leading multi-client geophysical data provider with a 2D and 3D seismic data library covering all major mature and frontier basins world-wide. Spectrum has successfully built a substantial presence in the South Atlantic and other important frontier regions. With TGS’ extensive library and financial robustness, the combined entity will be well positioned to accelerate 3D seismic investment plans in an improving market. Furthermore, the combined libraries will have a scale that will help accelerate TGS’ data analytics strategy.
In addition to providing a platform for further profitable growth, the combination will benefit from significant cost synergies with a preliminary estimate of approximately $20 million annually.
The transaction is supported by the board of directors of Spectrum, who has unanimously concluded that the transaction both from a financial and industrial perspective represents an attractive alternative for all its stakeholders. In addition, Spectrum shareholders representing more than 34 % have given their support to the transaction and undertaken to vote their shares in favor thereof. These shareholders include management of Spectrum, funds managed by Altor Fund IV and Gross Management AS (investment company of Spectrum director Glen Ole Rødland. Altor Fund IV (via Pål Stampe as Chairman of the Board and Maria Tallaksen as Board member) and Gross Management AS (Glen Ole Rødland as Board member) are represented on the Board of Directors of Spectrum. The above support and undertakings remain subject to consummation of definitive merger documentation.
Based on a TGS share price as of close May 2 of NOK 218.8, the exchange ratio plus the cash consideration implies a fully diluted equity value of Spectrum of NOK 3,671 million, corresponding to a price per share of NOK 61.9. This represents a premium, including the cash consideration, of 10.2% to Spectrum based on closing price on 2 May 2019 and a premium of 32.8% and 17.5% to Spectrum based on six month and 12 month VWAP as of May 2, respectively.
The completion of the transaction and the issuance of the consideration shares are expected to take place in the third quarter of 2019, subject to the conditions being fulfilled.
Reciprocal confirmatory due diligence has been completed by both TGS and Spectrum and completion of the transaction is not subject to any further due diligence review.
Further information regarding the transaction will be provided in a conference call at 14:00 (CEST) on Friday 3 May and in relation to Q1 2019 reporting on 9 May 2019.
Carnegie acts as financial advisor and Schjødt acts as legal advisor to TGS. Clarksons Platou Securities acts as financial advisor and Wiersholm acts as legal advisor to Spectrum.