Brazil’s Administrative Council for Economic Defense (Cade) has approved the global merger of Subsea7 and Saipem, subject to the sale of one vessel. The two companies provide engineering and subsea construction services to the oil and natural gas industry. The transaction is valued at US$4.6 billion and is expected to create one of the world’s largest providers of offshore infrastructure services.

The companies’ fleets include specialized vessels used to install rigid pipelines, cables and other equipment on the seabed, including at depths of more than 2,000 meters. Cade said the combined company may proceed with the deal only after selling one of these vessels. The agency’s technical staff will monitor negotiations for the asset.

Petrobras challenged the merger, arguing that the available fleet is limited and that few companies compete with Subsea7 and Saipem. It warned that combining their assets could weaken competition as investment in Brazil’s pre-salt oil fields expands, potentially increasing costs.

Cade’s rapporteur, council member Camila Alves, said the concentration created by the deal needed to be addressed. Data cited in her opinion showed that the two companies together take part in as much as 60% of Petrobras tenders. She said that, as close competitors, they could exert less competitive pressure when bidding for deepwater and ultra-deepwater projects. Her recommendation was supported by the other three members of the tribunal.

Cade also said that Petrobras, despite its dominant position in Brazil’s market, could face higher costs when negotiating with the merged company. Other global suppliers would not necessarily resolve the concern, the agency said, because competition depends on specific vessels and their availability during the execution windows of oil companies’ projects.

Cade’s General Superintendence had previously cleared the transaction without conditions, saying there was no evidence that the global supply of infrastructure vessels was insufficient to meet demand. The Brazilian Association of Oil Exploration and Production Companies called for the deal to be rejected, while ExxonMobil and TechnipFMC also raised objections.

The merger is also under review in other jurisdictions, including the United States and the European Union, because its effects are global.

Sources: Folha Mercado.