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TechnipFMC Retains Spin-Off Date, Expects to Boost Prospects

Zacks Equity Research

TechnipFMC plc FTI recently reconfirmed its plan to split into two companies, namely TechnipFMC and Technip Energies, and is on course for closure of the transaction in the first part of 2020.

Last year, this Seabed-to-surface oilfield equipment and services provider announced its intention to separate its engineering and construction business from its technology-focused subsea and surface operations, thereby creating two independent, publicly-traded companies.

The spin-off, expected to complete by the second quarter of 2020, is subject to certain precedent conditions and will see the formation of a new company that will include TechnipFMC’s Onshore/Offshore segment, Technip Energies (SpinCo).

Apart from expanding its LNG project capacity, this engineering and construction services company will deepen its focus on projects associated with biofuels and alternative energy. The industry player with an employee strength of 15,000 will have Catherine MacGregor at its helm as CEO, a Schlumberger SLB veteran currently serving as the president of TechnipFMC’s New Ventures unit.

The remaining business, TechnipFMC (RemainCo), will continue to be upstream-focused comprising TechnipFMC’s capital intensive subsea technologies and services. It will be headed by Doug Pferdehirt, the chairman and CEO, TechnipFMC. With workforce of about 22,000, the company, touted as the industry’s largest pure-play operator, will provide oil and gas producers with high-end equipment.  

The spin-off is proposed to be tax-free for the shareholders of TechnipFMC. Post separation, the current stockholders of TechnipFMC will be distributed with the outstanding shares of the spin-off. TechnipFMC will be based in Houston, TX while the new company, which will be traded on the Euronext Paris Exchange, is likely to be headquartered in Paris, France.

TechnipFMC’s move to split into two is seen as a strategic attempt to focus on different markets and tap the resultant entities’ growth opportunities. Investors should note that this London-based TechnipFMC was formed from the January 2017 merger between the oilfield service players Technip SA and FMC Technologies Inc. It combined Houston-based FMC Technologies, a major underwater energy equipment maker, with Paris-based Technip, an offshore oil and gas field developer.

TechnipFMC plc Price

TechnipFMC plc Price

TechnipFMC plc price | TechnipFMC plc Quote

Recent Energy Spin-Off

In a similar development last year, another company from the energy sector suggested a spin-off of its business. Marathon Petroleum MPC, a leading independent refiner, transporter and marketer of petroleum products, is recommended by Elliott Management Corp to break into three separate businesses. Claiming that Marathon suffered a long-term undervaluation in the equity market, Elliott vouched for the suggested split to help the company bolster its business scale while enhancing its shareholder value.

In this proposal, Elliott holding a nearly 2.5% stake in Marathon advises the company to disintegrate into three distinct independent concerns, namely RetailCo turning into autonomous Speedway, MidstreamCo converting to MPLX LP MPLX and RefiningCO­ transforming into New Marathon.

Conclusion

Analysts remain positive on the outlook for new TechnipFMC post the aforementioned split as it holds promise to unlock significant value. Creation of two different companies will allow both to pursue great opportunities in their respective market segments without the constraints of the parent company and better serve the needs of concerned investor groups.

The Zacks Rank #5 (Sell) TechnipFMC is set to release fourth-quarter fiscal 2019 results on Wednesday Feb 26, after the closing bell. The current Zacks Consensus Estimate for the to-be-reported quarter is pegged at earnings of 47 cents on revenues of $3,692 million. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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