Norway's Oil Industry Consolidates as Norsk Hydro Takes Over Saga Petroleum

The Norwegian government has given in to global industry pressures, with Norsk Hydro's takeover bid for Saga Petroleum marking the end of the minority coalition's attempt to preserve the country's trio of oil companies. The move by Norsk Hydro, a 51% government-controlled company, comes as the industry faces falling profitability, low oil prices, and intensified competition. Saga Petroleum's CEO, Diderik Schnitler, expressed surprise at the bid, but analysts suggest Norsk Hydro may have timed the move to avoid government opposition amidst turmoil at state-owned Statoil.

Key Takeaways:

Norsk Hydro's takeover bid for Saga Petroleum marks the consolidation of Norway's oil industry, ending the minority coalition's attempt to preserve three state-owned companies.
The deal is driven by industry pressures, including falling profitability, low oil prices, and intensified competition.
Saga Petroleum's CEO, Diderik Schnitler, expressed surprise at the bid from Norsk Hydro, but hinted at the possibility of a rival bidder emerging, citing a valued share price of NKr135 compared to Norsk Hydro's offer of NKr114 per share.
The takeover involves significant job cuts, with Norsk Hydro planning to eliminate around 800 positions in the combined entity, with no layer of the organization immune to cuts.
The deal presents considerable synergy savings of around $130m per year for both companies, in addition to Norsk Hydro's operating profit improvements of up to NKr5bn and Saga Petroleum's planned annual savings of NKr400m through restructuring.
Saga Petroleum's non-executive board will meet today to discuss the bid and decide on its next course of action, which may involve waiting for a higher price from a foreign bidder or accepting the proposed takeover.
The deal will see the government's stake in the combined entity reduced from 51% to 41.9%, with analysts speculating about the potential inclusion of foreign companies in the consolidation process.

Statistics:

Norsk Hydro's takeover bid for Saga Petroleum marks the end of the minority coalition's attempt to preserve three state-owned oil companies in Norway.
51% government-controlled Norsk Hydro is the acquiring company, with Saga Petroleum valued at around NKr135 per share compared to Norsk Hydro's offer of NKr114 per share.
The deal is expected to generate around $130m in annual synergy savings for both companies, in addition to Norsk Hydro's operating profit improvements of up to NKr5bn and Saga Petroleum's planned annual savings of NKr400m through restructuring.
800 jobs will be eliminated as part of the combined entity, with no layer of the organization immune to cuts.
The government's stake in the combined entity will be reduced from 51% to 41.9% under the proposed takeover.

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