Noble has agreed to acquire rival offshore drilling contractor Diamond Offshore Drilling in a stock and cash deal worth about $1.6bn.

Under the terms of the deal, shareholders of the New York Stock Exchange (NYSE) listed Diamond Offshore Drilling will be issued 0.2316 shares of Noble along with $5.65 per share in consideration.

The share exchange ratio will give Diamond Offshore Drilling’s shareholders a stake of around 14.5% in Noble, which is listed on NYSE and Canadian Securities Exchange (CSE).

The total value, combining cash and stock, offered to Diamond Offshore Drilling amounts to $15.52 per share. This represents a premium of 11.4% to closing stock prices on 7 June 2024.

The cash component of the consideration is $600m on a fully-diluted basis.

Diamond Offshore Drilling president and CEO Bernie Wolford said: “This combination is an ideal outcome that provides Diamond shareholders both immediate and long-term upside potential as part of a more fully scaled platform that can deliver customer and shareholder value on a through-cycle basis, more visibly and accessibly, while gaining access to Noble’s robust dividend programme. 

“Noble’s operational strength, service posture and proven integration capabilities make this a natural match for Diamond.”

Diamond Offshore Drilling offers contract drilling services to the global energy sector. Its fleet comprises 15 offshore drilling rigs, including 11 semisubmersibles and four dynamically positioned drillships.

Following its acquisition, Noble will have a fleet of 41 rigs, comprising 28 floaters and 13 jackups. As of today, the combined company’s backlog is estimated to be around $6.5bn, spanning an array of customers and operational regions.

Noble president and CEO Robert Eifler said: “This acquisition enables Noble to continue our journey of delivering superior innovation and value to a broad range of the leading offshore operators across the world. Our position will be strengthened with the addition of four 7th generation drillships and one of the most high-spec harsh environment semisubmersible rigs in the world. 

“Additionally, Diamond’s five conventional deepwater and midwater rigs have averaged above 85% utilisation over the last three years and currently have strong forward contract coverage.”

The board of directors of both companies has unanimously approved the transaction.

The deal is anticipated to conclude by Q1 2025. This will be subject to fulfilling standard closing conditions, such as obtaining necessary regulatory approvals and the consent of Diamond Offshore Drilling’s shareholders.

Morgan Stanley & Co. is serving as the principal financial adviser to Noble, having secured committed financing. Noble also received advice from Wells Fargo and SB1 Markets.

Legal counsel for Noble is provided by Paul, Weiss, Rifkind, Wharton & Garrison.

For Diamond Offshore Drilling, Guggenheim Securities and TPH&Co., the energy division of Perella Weinberg Partners, are the primary financial advisers. Legal guidance is being offered by Kirkland & Ellis.