Russian drilling contractor Eurasia Drilling Company (EDC) has received an offer for a potential merger with the intention to take the company private.
In a statement Thursday, the company said its board had received the Merger Proposal from certain management and core shareholders this morning which included an offer consideration of US$10.00 per share.
Subsequently the board formed a special comittee to negotiate on behalf of the Board the terms of a potential merger with the assistance of separate advisers appointed by the committee.
The Special Committee will make their recommendation to the Board to accept or reject the proposal.
The merger offer follows the failure of the proposed $1.7 billion transaction with Schlumberger.
As cost management becomes a foremost priority, going private also releases material financial benefit.
Providing a comment on the offer and the current situation in the oil and gas market, Eurasia Drilling Company said: “While EDC’s fundamentals are still robust in the long-term, the current performance is significantly impacted by a combination of challenging macro-economics, acceleration in ruble depreciation, continued geopolitical risks, upstream capex cuts by the Russian oil majors on the back of oil price pressure, compounded by changes in tax regulations for the oil sector, weak pricing for drilling, poor forward visibility on offshore activity and uncertainty in the services market stemming from sanctions.
Given all of these challenges, the management of EDC believes it requires maximum flexibility to manage the business, which is best facilitated by being a private company at this time. As cost management becomes a foremost priority, going private also releases material financial benefit.“
Lord Clanwilliam, Chairman of the Special Committee, said: “The Board is focused on preserving shareholder value following the failure of the Schlumberger transaction which would have been extremely beneficial to shareholders. The cancellation of this transaction is particularly unfortunate given all the challenges EDC is now facing. We are currently reviewing the Merger Proposal with the assistance of professional advisers and we will make our recommendation to the Board in due course. “
In a separate statement also issued on Thursday, EDC said its board appointed three new directors, following the resignations of five directors announced on October 1.
The new directors, appointed to fill current vacancies on the Board, are Murat Sampiev, Alexander Bogachev and Taleh Aleskerov.
Update: October 8, 15:02 CET
The Special Committee has asked the Company to clarify that the views regarding the Company and the Merger Proposal which are expressed in today’s earlier announcement are the views of the management and core shareholders who have put forward the Merger Proposal, not those of the Special Committee, which has not yet formed a view on the merits of the Merger Proposal.