Switzerland-based offshore driller Transocean is buying its rival Norwegian-Cypriot offshore driller Songa Offshore in a $3.4 billion worth deal.
Transocean has reached an agreement with Songa Offshore to acquire 100 percent of the issued and outstanding shares of Songa Offshore, including shares issued before expiry of the offer period as a result of the exercise of warrants, convertible loans and other subscription rights, Transocean said on Tuesday.
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 ($1.2 billion), and an enterprise value of approximately NOK 26.4 billion ($3.4 billion).
Transocean explained that the transaction strengthens its position with the addition of Songa Offshore’s four Cat-D harsh environment, semi-submersible drilling rigs on long-term contracts with Statoil in Norway. Songa Offshore’s fleet also includes three additional semi-submersible 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 $40 million.
Fleet of 51 units
The combined company will operate a fleet of 51 mobile offshore drilling units with backlog of $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 said it anticipates re-ranking the combined fleet, which may result in additional rigs being recycled.
Jeremy D. Thigpen, President and Chief Executive Officer of Transocean said: “Songa Offshore is an excellent strategic fit for Transocean. With this combination, we add four new state-of-the-art Cat-D semisubmersible rigs to our existing fleet, further enhancing our position in the harsh environment market. We also demonstrate our continued commitment to the Norwegian market and strengthen our technical and operational presence in that region. Importantly, we add approximately $4.1 billion in contract backlog to our already industry-leading backlog of $10.2 billion, which provides us with even more visibility to future cash flows in this challenging market.”
Frederik Wilhelm Mohn, Chairman of Songa Offshore, said: “The combination of Songa Offshore and Transocean is a strategic fit. The combined company will have an unparalleled backlog backed by strong counterparties. By adding Songa Offshore’s four Cat-D rigs to Transocean’s existing harsh environment fleet, the combined company will be the leader within this segment which is showing signs of recovery.”
Total transaction value of approximately $3.4 billion, including premium, comprises: $1.7 billion net assumed Songa Offshore debt; $660 million estimated Transocean Inc. convertible bond; $540 million estimated Transocean Ltd. equity; $480 million estimated Transocean cash.
No changes to Transocean’s executive management team or corporate structure are anticipated as a result of the combination. The company will remain headquartered in Zug, Switzerland, with operating presence in Houston, Texas, Aberdeen, Scotland and Stavanger, Norway. The combined company’s board of directors following the completion of the acquisition will include Frederik Wilhelm Mohn, Chairman of the Board of Songa Offshore and owner of Perestroika, Songa Offshore’s largest shareholder.
As part of the transaction, Transocean intends to establish a harsh environment center of excellence in Norway to the extent practical and commercially viable, which could support other harsh environment markets.
Upon Transocean acquiring at least 90% of the shares in Songa Offshore on a fully diluted basis through the offer, the driller stated it intends to make a compulsory acquisition of the remaining shares and to propose at a general shareholders meeting of Songa Offshore that an application be filed with the Oslo Stock Exchange to de-list the Songa Offshore shares. Transocean expects to close the transactions contemplated by the offer during the fourth quarter of 2017.
Earlier this year, Transocean sold its entire jack-up fleet, including five rigs still under construction at a Keppel yard, to a new offshore driller, Borr Drilling. The $1.35 billion worth deal closed at the beginning of June and Transocean booked a net loss of $1.7 billion for the second quarter of 2017 due to the jack-up fleet impairment.