Transocean to Buy Norwegian Firm Aker Drilling

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August 15, 2011

Aker Spitsbergen Drilling semisubmersible

By Katarina Gustafsson

Aiming to supplement its fleet in the arctic, American drilling giant Transocean Ltd. said it plans to acquire Norwegian drilling-rig operator Aker Drilling ASA for $1.43 billion in cash.

Under the transaction, Transocean, which owned the rig at the center of last year’s catastrophic Gulf of Mexico oil spill, has made a voluntary 26.50 kroner ($4.83USD) per-share cash offer for all outstanding shares in the company.

Transocean said early Monday that Aker Capital AS, a wholly owned subsidiary of majority holder Aker ASA, and other existing shareholders of Aker Drilling representing 60.5% of the outstanding shares, have committed to sell their shares to Transocean. A subsequent Aker news release later Monday said Transocean had acquired 8.7% of issued shares and has irrevocable acceptances for 67.6% of Aker’s shares.

The offer price represents a 62% premium to Aker Drilling’s 30-day average price of 16.39 kroner a share, Transocean said. The transaction will be funded using existing cash balances and debt facilities. Transocean is also assuming $800 million in Aker Drilling’s debt, lifting the total value of the deal to $2.23 billion.

Transocean said the Aker Drilling acquisition would contribute about $1 billion in contract backlog and would be “immediately accretive” to its earnings. Aker operates two of the world’s most advanced deepwater drilling units and has two other ultra-deepwater drill ships under construction in South Korea.

Transocean’s most recent earnings plummeted 78% following lower utilization of its drilling fleet. The company continues to spar with BP PLC in the aftermath of last year’s Deepwater Horizon disaster, which killed 11 people and produced a massive oil spill. The accident has spurred lawsuits.

Transocean Chief Executive Steven Newman notes the Aker assets would “enhance our place in Norway where we have enjoyed a long-term presence.”

Aker Chief Executive Øyvind Eriksen said the company looked at “several alternatives featuring interesting market participation” in anticipation of possible consolidation, but picked Transocean because the cash offer was “good for Aker Drilling and all shareholders.”

The Transocean acquisition gave a boost Monday to oil-services companies, especially to other drillers that could become acquisition targets.

“It’s positive that the world’s largest drilling company has such a positive view on the drilling market that they are prepared to do buys,” said analyst Kjetil Garstad at Arctic Securities.

Mr. Garstad said shallow-water jack-up rigs could be next in line to be acquired, mentioning companies like Standard Drilling PLC and Prospector Offshore Drilling S.A. Standard Drilling shares were up 7% to 5.35 kroner Monday. Prospector jumped 11.6% to 8.15 kroner during early afternoon trade.

Morgan Stanley and Fearnley Fonds/Fearnley Offshore are acting as financial advisers to Transocean Services and Wikborg Rein is acting as legal adviser to Transocean Services.

Shares in Aker Drilling on Monday shot up 95% to 26 kroner following news of the offer.

Gustav Sandstrom contributed to this article.

Dow Jones & Company, Inc.


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