Danish Giants Maersk and Dong Said to Eye Solutions for Oil Armsby and
Maersk, Dong said to have discussed merging units last year
Dong said to work with advisers to find buyers for business
As two of Denmark’s biggest companies, A.P. Moeller-Maersk A/S and Dong Energy A/S, look for ways to separate from volatile oil and gas businesses, bankers are advising them to work together, people familiar with the matter said.
Maersk held preliminary talks to buy Dong’s oil and gas unit last year, but the companies failed to agree on a price, said the people, who asked not to be identified because the discussions were private. While both firms are focused on solving their problems independently, financial advisers are pitching the idea of merging the entities to create a Danish resource giant and cut out costs, the people said.
Separately, Dong is working with advisers to find potential buyers for its oil and gas business, which could fetch at least $2 billion, the people said. The company, which is shifting its strategy toward renewable energy after an initial public offering this year, hasn’t started a formal sale process, they said.
Dong is keen to sell the unit for cash, the people said. That might prove difficult for Maersk, which unveiled plans to split into energy and transport entities this week, because it’s looking to raise funds, the people said. There are no formal negotiations happening between the companies now, they said.
Maersk’s newly created oil business will have a value of as much as 60 billion kroner ($9 billion), assuming an average price of $55 a barrel for brent crude, according to Alm. Brand A/S analyst Michael Friis.
European utilities are responding to weak demand, new regulation and low prices in the industry by separating non-core divisions and selling assets. French utility company Engie SA is pushing ahead with a plan to sell its exploration unit, offering assets that span Europe to Africa as the company works to reduce its exposure to oil and gas prices, people familiar with the matter said in July.
Dong was valued at about $15 billion in its initial public offering in June as the company’s plans to transform itself into a renewable energy giant proved popular with investors.
Dong’s daily production of oil and gas in 2015 averaged 115,000 barrels, of which 90 percent came from Norwegian fields and the remainder from Danish fields, according to its website. The division had revenue of 12.8 billion kroner last year.