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Transocean $RIG acquired Norway's  Songa Offshore SE for US$3.4 billion. The purchase price of NOK 47.50 per share a 37.0% premium to Songa Offshore’s five-day average closing price of NOK 34.68 per share.

Transocean is the world’s largest offshore drilling contractor and leading provider of drilling management services. $RIG recently released better than expected 2Q17 results. The acquisition comes after $RIG has been affected by reduced activity and lower revenue efficiency hurting contract drilling revenues. 

Highlights

  • Strengthens Position as Undisputed Leader in Harsh Environment and Ultra-Deepwater Drilling
  • Increases Contracted Backlog by USD $4.1 Billion, to a combined total of USD $14.3 Billion
  • Generates Anticipated Annual Cost and Operational Synergies of approximately USD $40 Million
  • Expected to Be Accretive on an EBITDA, Operating Cash Flow, and Net Debt / EBITDA Basis
  • Recommended by the Songa Offshore board of directors and supported by approximately 76.6% of the shareholders signing irrevocable pre-acceptance agreements

Reaction: Transocean Ltd NYSE: RIG Pre-market: 8.17 -0.22 (-2.62%)

The consideration in the Offer will be based upon NOK 47.50 per share of Songa Offshore, representing a 37.0% premium to Songa Offshore’s five-day average closing price of NOK 34.68 per share. The consideration implies an equity value of Songa Offshore on a fully diluted basis of approximately NOK 9.1 billion (USD $1.2 billion), and an enterprise value of approximately NOK 26.4 billion (USD $3.4 billion).

•  Total transaction value of approximately USD $3.4 billion, including premium, comprises:  

  • USD $1.7 billion net assumed Songa Offshore debt
  • USD $660 million estimated Transocean Inc. convertible bond
  • USD $540 million estimated Transocean Ltd. equity
  • USD $480 million estimated Transocean cash

As part of the transaction, Songa Offshore’s legacy fleet loan, and a portion of its unsecured bonds including the associated swaps are expected to be retired with cash. Songa Offshore’s remaining unsecured bonds and Perestroika’s shareholder loan will be satisfied with convertible bonds issued by Transocean Inc., as described below. The Songa Offshore Cat-D secured credit facilities will be assumed by Transocean, or refinanced as determined at a future date.

The transaction strengthens Transocean’s industry-leading position with the addition of Songa Offshore’s four “Cat-D” harsh environment, semisubmersible drilling rigs on long-term contracts with Statoil in Norway. Songa Offshore’s fleet also includes three additional semisubmersible drilling rigs. The transaction is expected to be accretive on an EBITDA, Operating Cash Flow, and Net Debt / EBITDA basis, and the Company anticipates annual expense synergies of approximately USD $40 million.

The combined company will operate a fleet of 51 mobile offshore drilling units with backlog of USD $14.3 billion consisting of 30 ultra-deepwater floaters, 11 harsh environment floaters, three deepwater floaters and seven midwater floaters. Additionally, Transocean has four ultra-deepwater drillships under construction, including two contracted with Shell for ten years each. Consistent with Transocean’s strategy of recycling older less capable rigs, Transocean anticipates re-ranking the combined fleet, which may result in additional rigs being recycled.

Deal Details: Source: Transocean

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