PGS to merge with arch rival Veritas DGC

Norwegian oil services company, Petroleum Geo Services ASA and rival Veritas DGC have agreed to a merger.

The combined company expects to save about $35 million a year on a pre-tax basis and immediately boost earnings after the merger closes in the second quarter. PGS holders would own about 60 per cent of the new company, which will be based in Houston, and incorporated in the Cayman Islands.

"Cost savings should be a big reason for a deal like this. There are too many vessels for too little work recently," one analyst commenting on the deal said. "So pricing hasn't been very good and margins haven't been very good."

PGS shareholders will receivet 0.47 shares of the new holding company for each share, a 44% premium on last week's trading. Veritas shareholders get a one for one swap.