Maersk’s Offloading of Drilling Unit is Latest Move to Exit Energy

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August 17, 2018

A Maersk semisubmersible drilling rig in the Gulf of Mexico. Credit: Equinor

By Christian Wienberg (Bloomberg) — A.P. Moller-Maersk A/S has decided to list its drilling unit separately, marking its latest step toward a complete exit from the energy industry.

Copenhagen-based Maersk, which owns the world’s biggest shipping operations and is working on turning itself into a pure transport company, said on Friday that the decision will take effect sometime next year.

Maersk shares opened about 4 percent higher in Copenhagen, topping Denmark’s benchmark index of the country’s most-traded stocks.

Chief Executive Officer Soren Skou said management had explored “all options” for the drilling unit before deciding on a separate listing in the Danish capital. “We believe this will create the best value for our shareholders,” he said in an interview with Bloomberg Television’s Matthew Miller.

The 114-year-old firm has been planning a historic break with its conglomerate structure since the summer of 2016. Aside from turning its back on the oil and gas industry following the 2014 slump in prices, Maersk has also sold off shares in Danske Bank A/S and exited a grocery business to focus exclusively on the container transport industry that it dominates.

The Family

The Maersk family’s holding company will initially own more than 40 percent of the new listed drilling entity, and has “made a commitment” to continue as a major shareholder, Skou said. The unit is worth about $4.4 billion, according to Bloomberg Intelligence analyst Talon Custer. Maersk cited a consensus view among analysts in February that the unit was valued at about $4.7 billion back then.

Robert Maersk Uggla, the CEO of the holding company, said “we welcome A.P. Moller-Maersk’s initiative to pursue a demerger of Maersk Drilling and, if concluded, A.P. Moller Holding looks forward to becoming a large shareholder.”

As part of the preparation for the new listing, debt financing of $1.5 billion from a group of international banks has been secured for Maersk Drilling “to ensure a strong capital structure,” the company said.

Bloomberg News reported late on Thursday that the deal was imminent, after Maersk decided that bids from potential buyers were too low. The company has given itself until the end of this year to exit all energy operations. In 2017, it agreed to sell its oil and gas business, as well as its tanker operations, for almost $10 billion combined. Most of that money was in the form of shares from the Total SA deal.

What’s Left

The Danish company still has a supply-service unit that is marked for divestment. In February, Maersk cited a consensus estimate by analysts that those assets were worth about $600 million.

Claus Hemmingsen, who runs Maersk’s energy business, said the company hopes to communicate more details on the exact timing of the separate listing as soon as it knows more. As far as the supply business is concerned, he said Maersk doesn’t see a solution here and now.

Maersk Drilling, which employs about 4,000 people, specializes in large rigs that can work in harsh environments. Its fleet includes about 15 jack-up rigs, four semi-submersibles and four drillships. Maersk took a $1.75 billion impairment on the unit in November and reclassified it as “discontinued operations,” signaling a sale had moved closer.

The decision to seek a separate listing shows “there hasn’t been significant enough interest from buyers,” Per Hansen, an investment economist at Nordnet, said in an email. “On the other hand, it’s a good signal to ‘clean up’ instead of still having non-core assets lying around as leftovers.”

Total Shares

Maersk also said it sold a $1.2 billion stake in Total last month, representing just over 19 million shares of the roughly 98 million that the Danish company received as part of the transaction.

Once Maersk Drilling becomes a separate company on the Nasdaq Copenhagen exchange, “a material part of the remaining Total SA shares” will be distributed to Maersk shareholders in the form of cash dividends, share buy-backs or as a distribution of the Total shares directly, the company said on Friday.

© 2018 Bloomberg L.P

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