Transocean agrees to acquire Songa Offshore in deal valued around $3.4B
Transocean (RIG) has reached an agreement with Norwegian-Cypriot Songa Offshore SE whereby it will, subject to certain conditions, make a Voluntary Exchange Offer to acquire 100% of the issued and outstanding shares of Songa Offshore, including shares issued before expiry of the offer period as a result of the exercise of warrants, convertible loans and other subscription rights.
The consideration in the Offer will be based upon NOK 47.50 per share of Songa Offshore, representing a 37.0% premium to Songa Offshore’s five-day average closing price of NOK 34.68 per share.
The consideration implies an equity value of Songa Offshore on a fully diluted basis of approximately $1.2B, and an enterprise value of approximately $3.4B.
The transaction strengthens Transocean’s industry-leading position with the addition of Songa Offshore’s four “Cat-D” harsh environment, semisubmersible drilling rigs on long-term contracts with Statoil in Norway. Songa Offshore’s fleet also includes three additional semisubmersible drilling rigs.
The transaction is expected to be accretive on an EBITDA, Operating Cash Flow, and Net Debt / EBITDA basis, and the company anticipates annual expense synergies of approximately $40M. The combined company will operate a fleet of 51 mobile offshore drilling units with backlog of $14.3B consisting of 30 ultra-deepwater floaters, 11 harsh environment floaters, three deepwater floaters and seven midwater floaters.
Additionally, Transocean has four ultra-deepwater drillships under construction, including two contracted with Shell for ten years each. Consistent with Transocean’s strategy of recycling older less capable rigs, Transocean anticipates re-ranking the combined fleet, which may result in additional rigs being recycled.
Jeremy Thigpen, President and CEO of Transocean said: “Songa Offshore is an excellent strategic fit for Transocean. With this combination, we add four new state-of-the-art Cat-D semisubmersible rigs to our existing fleet, further enhancing our position in the harsh environment market. We also demonstrate our continued commitment to the Norwegian market and strengthen our technical and operational presence in that region.
Importantly, we add approximately $4.1B in contract backlog to our already industry-leading backlog of $10.2B, which provides us with even more visibility to future cash flows in this challenging market.” The transaction is recommended by Songa Offshore’s board of directors and certain members of the senior management team, in addition to Songa Offshore shareholders Perestroika AS, funds beneficially owned by Asia Research & Capital Management Ltd., and York Capital Management Global Advisors, LLC, which collectively beneficially own 76.6% of Songa Offshore’s outstanding shares on a fully diluted basis and have all executed irrevocable pre-acceptance agreements pursuant to which they will agree to accept the Offer.
These pre-acceptances cannot be withdrawn as a result of a superior offer from a third party. The remaining Songa Offshore shareholders have the option to accept the consideration as described below in Additional Transaction Elements. The transaction has a value of approximately $3.4B, including premium. No changes to Transocean’s executive management team or corporate structure are anticipated as a result of the combination.
The company will remain headquartered in Zug, Switzerland, with significant operating presence in Houston, Texas, Aberdeen, Scotland and Stavanger, Norway. The combined company’s board of directors following the completion of the acquisition will include Frederik Wilhelm Mohn, chairman of the board of Songa Offshore and owner of Perestroika AS, Songa Offshore’s largest shareholder.
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