The planned $13 billion union of oil services companies FMC Technologies (NYSE: FTI) and Technip (EPA: TEC) could give birth to a group with a broad portfolio of subsea, surface and onshore/offshore technologies and execution expertise that executives believe will drive cash flow.

The two companies said May 19 they have agreed to merge. If the deal receives the blessing of FMC and Technip shareholders and other necessary regulatory approvals, the new company—which will be called TechnipFMC—will operate as five business units: surface, subsea services, products, subsea projects and onshore/offshore.

The move essentially takes FMC and Technip’s relationship to the next level. The two companies formed a 50-50 joint venture, Forsys Subsea, in 2015 offering subsea solutions aimed at reducing the costs of subsea field developments through use of innovative technology and early involvement in front-end engineering and design (FEED) concept selection.

“A year ago we were at the forefront of recognizing the importance of a broader view of our clients’ challenges and seized the opportunity that working together in our alliance could bring,” said Technip CEO Thierry Pilenko, who will serve as executive chairman of TechnipFMC. “Today we want to take this strategy further and across the full footprint of the two companies. We have complementary skills, technologies and capabilities, which our customers can access on an integrated basis or separately as they prefer.”

The all-stock transaction is expected to create a company valued at $20 billion and deliver annual pre-tax cost savings of at least $400 million brought by “supply chain efficiencies, real estate, infrastructure optimization and other corporate and organizational efficiencies,” according to a news release.

News of the pending merger was delivered as oil and gas companies—offshore and onshore alike—battle continued rough commodity price conditions driven by a worldwide hydrocarbon oversupply. Goals of salvaging profits have led companies to cut costs, seek technology and in some cases, merge.

The FMC-Technip merger follows the $14.8 billion merger of Cameron into Schlumberger (NYSE: SLB), forming a pore to pipeline one-stop shop for oilfield services onshore and offshore. Like FMC and Technip, Cameron and Schlumberger had formed a JV—OneSubsea—before the two became one. The deal was completed in April 2016.

The breakup fee for the FMC and Technip merger is $250 million. However, considering the companies are not direct competitors, Exane BNP Paribas analyst James Evans said the deal is likely to succeed.

“The synergies targeted are significant—and above what we expected” given the lack of “overlap” between the two companies, Evans told Bloomberg.

FMC and Technip don’t expect any regulatory issues “as the overlap between our companies are minor,” Pilenko said on a conference call May 19. “We expect to be up and running early next year.”

The merger would bring together a Houston-based company known for its subsea systems technology and a Paris-headquartered leader in energy project management, engineering and construction firm.

“This transaction will allow us to deliver even greater benefits to our customers through a broadened portfolio that provides a unique set of integrated technologies and competencies that are underpinned by a history of developing rich partnerships and creating customer success,” said Doug Pferdehirt, president and COO of FMC Technologies. He will serve as CEO of TechnipFMC.

FMC CEO John Gremp called the merger “a compelling combination that will create significant additional value for clients and all shareholders, by expanding the success that FMC Technologies and Technip have achieved through our alliance and joint venture, to capitalize on new opportunities and drive accelerated growth.”

Word of the merger did not come as a complete surprise to the industry, according to RBC Capital Markets analysts, which mentioned Dec. 9, 2015, press reports on advanced merger discussions.

“We think a FTI/TEC combo makes strategic sense in an oil market where service companies are looking for any edge to help operators lower upfront costs and increase recovery rates,” RBC Capital Markets said in a note. “We think it is likely that the deal could spur more M&A activity in the OFS space, particularly on the subsea equipment side, with OII as a potential acquisition candidate among our coverage universe.”

The deal is expected to close in early 2017. At closing, each share of Technip common stock will be converted into two ordinary shares of TechnipFMC, while each share of FMC Technologies will be exchanged for one share of the new company, according to the transaction terms.

Eligible directors of the boards of both companies have already approved the merger.

Velda Addison can be reached at vaddison@hartenergy.com.