Offshore drilling contractor Transocean has entered into an agreement to acquire its rival Ocean Rig in a cash and stock deal worth $2.7bn.
The transaction also includes Ocean Rig’s net debt, which stood at $397m at the end of March this year.
Transocean intends to fund the cash portion of the acquisition cost through a combination of cash on hand and fully committed financing offered by Citi.
Following the completion of the merger, Transocean’s shareholders will own nearly 79% stake in the combined company, while the remaining stake will be held by Ocean Rig’s shareholders.
Transocean’s president and chief executive officer Jeremy Thigpen said: “The proposed acquisition of Ocean Rig provides us with a unique opportunity to continue enhancing our fleet of ultra-deepwater and harsh environment floaters, without compromising our liquidity or overall balance sheet flexibility.”
The acquisition is expected to enhance Transocean’s position as the major player in ultra-deepwater and harsh environment drilling space.
It will enable the company to gain Ocean Rig’s fleet comprising of nine high-specification ultra-deepwater drillships and two harsh environment semisubmersibles.
Ocean Rig’s fleet also includes two high-specification ultra-deepwater drillships currently under construction at Samsung Heavy Industries.
The two drillships are anticipated to be delivered in the third quarter of 2019 and the third quarter of 2020, respectively.
Thigpen said: “This combination with Ocean Rig further strengthens our relationships with strategic customers, while expanding our presence in the key markets of Brazil, West Africa and Norway.
“It also enables us to reduce our cost per active rig, as we believe that we can efficiently merge the Ocean Rig operations into our existing structure with limited incremental shore-based expense.”
The transaction is expected to be closed in the first quarter of 2019. It is subject to the approval of both Transocean and Ocean Rig shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.
Upon completion of the merger, Transocean will remain headquartered in Steinhausen, Switzerland, with a major operating presence in Houston, Texas, Aberdeen, Scotland and Stavanger, Norway.
In May, Transocean acquired 33.3% stake in the West Rigel, a newbuild harsh environment semisubmersible rig, for $500m.