Abbot and ProSafe in pounds 500m tie-up to create drilling giant

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THE RAPIDLY-consolidating oil industry witnessed another merger yesterday when Abbot Group, an oil contractor, announced a pounds 500m tie-up with its Norwegian rival ProSafe to form the world's largest operator of drilling platforms.

The all-share, no-premium merger of equals will create a dominant player in the North Sea oil market with combined sales of over pounds 300m and more than 3,000 employees.

The two firms said the deal would lead to very few redundancies among Abbot's Aberdeen-based 1,800 employees and ProSafe's 1,200 staff as there was little overlap between the two companies.

The merged entity will operate 26 offshore oil platforms on behalf of large oil corporations in the UK and Norwegian waters of the North Sea.

Shares in both companies soared on news of the deal as industry analysts said that the merger would boost Abbot and ProSafe's earnings. Abbot rose 13.5p to 192.5p, while ProSafe rocketed 58 per cent to 88.5 Norwegian krona on the Oslo stock exchange.

City analysts said the merger had been partly driven by the two companies' need to increase their critical mass following a string of mergers among their main customers and a collapse in oil prices.

Over the past few months, BP has linked up with Amoco of the US in a pounds 90bn deal, Exxon and Mobil announced a pounds 46bn merger, and Total and Petrofina combined in an pounds 8.1bn tie-up.

Industry experts said the mergers had increased the majors' buying power and service needs. "Bigger customers want bigger suppliers," one City analyst said.

Shares in the new company, to be called Abbot, will be listed in London and will be split equally between Abbot and ProSafe's investors.

Alasdair Locke, Abbot's chairman and largest shareholder, will become the executive chairman of the enlarged group. Reidar Lund, ProSafe's chief executive officer, is set to remain in the same post in the new entity, the two companies said.

Michael Salter, Abbot's chief operating officer, said the merger would give the company the financial firepower to expand in lucrative oil markets in the Caspian Sea and Western Africa.

Mr Salter said that the combined group would use its position in the offshore platforms markets to expand in other areas of the oil services industry.

"The merger will give us added strength. The objective is to use that strength to provide a wide range of oil services around the world," he said.