Transocean Ltd. (RIG, RIGN.VX) said it is offering 26 million shares of its common stock as the offshore oil drilling giant looks to raise funds to help refinance a recent acquisition.
Shares were down 4.2% to $44 in trade before the market open as the company said the offering represents up to 8.9% of its total issued and outstanding shares.
The company noted it intends to use the proceeds to partially refinance its acquisition of Norway’s Aker Drilling ASA, which was initially financed through the use of available cash and the assumption of Aker’s outstanding debt. The company completed its $1.43 billion acquisition of the rival driller last month, a move that expands its business into the harsher, more challenging sub-Arctic waters.
The offering price for the shares is expected to be determined through an accelerated bookbuilding process.
(c) 2011 Dow Jones & Company, Inc.
What are the experts saying?
Transocean’s (RIG) plan to boost shares outstanding some 9% to fund debt repayment has some inauspicious timing, coming as the stock is slightly above 7-year lows. Shares are down 20% this month alone after the offshore oil driller barely posted a 3Q profit and has seen 4Q rig downtime surge, prompting some analysts to cut EPS targets for this quarter. And with borrowing rates near historic lows, it makes one wonder why RIG isn’t refinancing the debt with fresh borrowings instead of a stock offering that would have generated more cash or been less dilutive to current holders had it occurred early this year, when RIG was above $80. Shares are down 4.2% premarket at $44. – Dow Jones