(Bloomberg) -- Saipem SpA is considering a combination with rival Subsea 7 SA to create a larger European oil services provider, people with knowledge of the matter said.

The Italian company is pursuing a potential deal with Subsea 7 as it seeks to bulk up and weather an industry downturn, according to the people, who asked not to be identified because the information is private. Shares of Subsea 7 have risen 15% in Oslo trading this year, giving the company a market value of about $3.2 billion.

Saipem, whose biggest shareholder is Italian energy giant Eni SpA, is valued at about $4.8 billion. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction, according to the people.

The companies have held talks about a merger in previous years, though they failed to reach an agreement, the people said.

Representatives for Saipem, Subsea 7 and Eni declined to comment.

Oil services providers have been hit hard by the drop in crude prices, as energy explorers cut spending on everything from drilling rigs to support platforms. The price of North Sea Brent crude has fallen about 28% from a five-year peak in October 2018.

Cut, Diversify

Companies in the sector have been seeking to bulk up in order to cut costs, diversify and become more competitive.

Subsea 7, led by Chairman Kristian Siem, made a failed attempt last year to take over McDermott International Inc. for $2 billion. Since then Subsea 7 has made some smaller deals, buying technology provider 4Subsea in October for an undisclosed sum.

General Electric Co. merged its oilfield-services arm with Baker Hughes Co. in 2017. John Wood Group Plc acquired Amec Foster Wheeler Plc for almost $3 billion in stock the same year.

--With assistance from Kiel Porter.

To contact the reporters on this story: Ed Hammond in New York at ehammond12@bloomberg.net;Daniele Lepido in Milan at dlepido1@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, ;Liana Baker at lbaker75@bloomberg.net, ;Rebecca Penty at rpenty@bloomberg.net, Michael Hytha

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