Oil and gas drilling contractor Nabors Industries has signed an agreement to acquire the U.S. oilfield services company, Tesco Corporation, in an all-stock transaction.
Nabors said on Monday it will acquire all of the issued and outstanding common shares of Tesco Corporation, with each outstanding share of common stock of Tesco being exchanged for 0.68 common shares of Nabors.
According to Nabors, this transaction will create a rig equipment and drilling automation provider by combining Canrig, Nabors rig equipment subsidiary, with Tesco’s rig equipment manufacturing, rental and aftermarket service business. Additionally, Tesco operates a tubular services business in numerous key regions globally, which will immediately benefit Nabors Drilling Solutions’ operation.
Nabors said it is positioned to automate and integrate tubular services into its global rig footprint. By combining its complementary products, tools and technologies, it will be able to offer customers more fit-for-purpose products, services and solutions. This expanded capability will enable the company to further improve operational efficiency, accelerate and scale its development of new and innovative equipment on its new generations of rigs as well as upgrade older classes of rigs for a new age of drilling.
This transaction values Tesco common stock at $4.62 per share based on the closing price of Nabors shares on the New York Stock Exchange on August 11, 2017, which represents a 19% premium of the closing value of Tesco shares on the NASDAQ Stock Market on August 11, 2017. The transaction is subject to regulatory approval and customary closing conditions and is expected to close in the fourth quarter.
“The addition of Tesco to our company represents another step forward for both our rig equipment and Nabors Drilling Solutions business. Tesco is respected for the quality of their product offerings and aftermarket service levels. I am eager to realize the benefits to our combined customers and shareholder groups that this combination will provide,” said Nabors Chairman, President and Chief Executive Officer, Anthony G. Petrello.
Michael W. Sutherlin, Tesco’s Non-Executive Chairman of the Board, said, “With this transaction, Tesco will now have an expanded platform, which will allow for acceleration of its strategy and increase the potential for market share gains around key industry trends. The combination will provide significant value to Tesco shareholders by participating in a stronger and broader offering of complementary rig equipment product lines and tubular services.”
Fernando Assing, Tesco’s President and Chief Executive Officer, commented, “This is a very exciting opportunity to combine two world class companies that are highly focused on delivering best-in-class services to the oil and gas industry. This combination will further reinforce Nabors position as a leading rig equipment and drilling automation provider by integrating Tesco’s advanced tubular services technology and products into the Nabors global rig footprint and NDS services. The new expanded platform also creates significant career opportunities for Tesco’s employees as part of a much larger international organization.”
Petrello concluded, “This transaction accelerates the strategy I presented at our Analyst Day in November of 2016. Several years ago we concluded that the drilling rig will serve as the delivery platform for future rig services. The early success of our service integrations efforts are substantiating this strategy. Now, with the largest land drilling fleet and with the automation features of our Rigtelligence operating system, Nabors is uniquely positioned to further deploy Tesco’s premium casing running tools and automation technologies globally.
“Additionally, the combination of our complementary rig equipment product lines and technologies will deliver enhanced value to both our customers and our shareholders. Finally, the incremental cash flow and the realization of expected synergies combined with Tesco’s solid balance sheet will further strengthen our financial position. First year operating synergies are expected to approach $20 million with full run-rate operating synergies of $30 to $35 million. In addition, we expect to realize capital savings from facility rationalization and the planned build out of our casing running operation. We are excited about Tesco’s respected management team and highly skilled employees joining Nabors and helping to deliver the benefits of this combination to our customers and shareholders.”
The transaction has been approved by the boards of directors of both companies and is subject to approval by Tesco shareholders and the satisfaction of customary closing conditions and regulatory approvals.