Offshore-oil driller Transocean Ltd. (RIG) announced plans for an all-cash acquisition of Norway's Aker Drilling ASA for 7.93 billion kroner or $1.46 billion along with a net debt of $800 million. The purchase price – of 26.50 kroner per share – represents a 62% premium to Aker Drilling's 30-day average price of 16.39 kroner per share.
This deal marks the biggest acquisition on 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.
The to-be acquired company, 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. Aker Drilling also has two ultra-deepwater drillships under construction in South Korea that are slated for delivery in 2013.
Management of Switzerland-based Transocean remains highly optimistic about this deal and believes that the acquisition will render the company’s fleet a commanding position in offshore drilling.
We believe that following the purchase, Transocean will possess a technologically advanced fleet of drilling rigs that will be capable of operating in tough of Arctic and Brazilian waters.
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 long-term visibility of earnings and cash flow growth.
However, we maintain our Neutral recommendation on the stock, considering the volatile macro backdrop, operational disturbances and international business risks.
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