Following the clearance from the Oslo Stock Exchange, Transocean Ltd. (RIG) formally launched an all-cash acquisition bid worth 7.93 billion kroner or $1.46 billion for Norway's Aker Drilling ASA along with a net debt of $800 million.
Transocean’s purchase price remains unaltered from the previously announced 26.50 kroner per share. However, the current bid has been made on an unconditional basis and the settlement has been guaranteed by a financial institution.
Transocean along with its affiliates have already purchased a 13.7% stake at Aker Drilling and 59.5% stakeholders of the latter have committed to accept the purchase bid. The offer period extends from August 26 to September 23.
This deal marks the biggest acquisition on the part of Transocean in the last four years and will be executed through its wholly owned subsidiary, Transocean Services AS. The purchase will lend approximately $1.05 billion to Transocean’s contract backlog and is expected to be immediately accretive to its earnings.
Aker Drilling owns and operates two harsh-environment, ultra-deepwater semi-submersible rigs – Aker Barents and Aker Spitsbergen – contracted to Statoil ASA (STO) and Det Norske in Norway, respectively. Aker Drilling also has two ultra-deepwater drillships under construction in South Korea that are slated for delivery in 2013.
We believe that with the acquisition of Aker, Transocean will possess a technologically advanced fleet of drilling rigs that will be capable of operating in tough Arctic and Brazilian waters.
Switzerland-based Transocean is a leading offshore drilling contractor and the leading provider of drilling management services worldwide. As of December 31, 2010, Transocean’s drilling fleet consisted of 47 high-specification deepwater floaters, 25 mid-water floaters, 9 high specification jackups, 53 standard jackups, and 3 other rigs utilized to support offshore drilling activities worldwide.
With a hi-tech and versatile offshore drilling fleet, strong backlog and considerable pricing power, we believe that Transocean offers strong earnings visibility and cash flow growth over the long term. However, we maintain our Neutral recommendation on the stock considering the volatile macro backdrop, operational disturbances and international business risks.
Transocean currently holds a Zacks #3 Rank, which translates into a short-term Hold rating.
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