Oil Driller Ensco To Buy Pride For $7.31B
LONDON (AP) - Oil rig company Ensco PLC has agreed to buy U.S. rival Pride International Inc. in a $7.3 billion deal that will create the world's second largest offshore drilling company.
The deal provided a boost Monday for drilling industry shares following several months of political and public pressure in the wake of the Gulf of Mexico oil spill last April.
The combined company will be valued at $16 billion and have a total of 74 rigs, including 21 ultra-deepwater and deepwater platforms, in key locations around the world - placing it behind Switzerland's Transocean Ltd., the owner of BP's ill-fated Deepwater Horizon rig in the Gulf and the world's largest driller.
"The combination is an ideal strategic fit, as our rig types, markets, customers and expertise complement each other with minimal overlap," Ensco Chief Executive Officer Dan Rabun said.
Houston, Texas-based Pride brings expertise building and operating ultra-deepwater semi-submersibles and drillships, with customers in the fast-growing markets of Brazil and West Africa, to the table. London-based Ensco, meanwhile, is a leading provider of rigs in the North Sea, Southeast Asia, North America and the Middle East.
Pride CEO Louis Raspino has said that bigger drilling companies would be better able to afford the cost of new regulations and retain top employees in the wake of the BP oil spill in the Gulf.
U.S. regulators have imposed new requirements for deepwater drilling permits. Drilling activity in the Gulf remains limited although a moratorium was lifted months ago.
Raspino said expected the new Ensco to "expand significantly around the globe," while stressing it would do so in a "safe and ethical manner."
The deal, valued at a total of $41.60 per share, is a 21 percent premium to the Houston-based Pride's closing price on Friday.
In the shares and stock offer, Pride stockholders will receive 0.4778 shares of London-based Ensco, plus $15.60 in cash for each share of Pride common stock. Ensco shareholders will hold 62 percent and Pride stockholders 38 percent of the combined company. Closing is expected as early as the second quarter.
Pride shares were up 15.7 percent, or $5.41, to close at $39.80 on the New York Stock Exchange. Ensco shares dropped $2.28, or 4.2 percent, to close at $52.13.
Among other drillers in the U.S., Seahawk Drilling Inc. was up 10 percent, Atwood Oceanics Inc. rose 5.5 percent and Nabors Industries Ltd. gained 0.5 percent.
The Pride-Ensco deal extends consolidation in the U.S. oil services industry after Schlumberger Ltd. acquired Smith International Inc. for $9.6 billion in August. Ensco itself last year made a failed bid to buy Bermuda-based driller Scorpion Offshore Ltd.
Ensco expects the combined company to realize pretax expense synergies of at least $50 million beginning in 2012.
The deal is forecast to boost estimated earnings per share of $5.11 in 2012 by more than 10 percent and lift the combined company's backlog of unfulfilled orders to $10 billion, which Ensco plans to use to support further growth.
The combined company will retain the name Ensco and will remain domiciled in Britain with "virtually all" the senior executives located in London.
Rabun will remain CEO and James W. Swent will retain his post as chief financial officers. Ensco said the rest of the management team, to include Pride executives, will be announced at a later date.
The combined company will have operations in Southeast Asia, the North Sea, Mediterranean, U.S. Gulf of Mexico, Mexico, Middle East and Australia, as well as the fastest-growing deepwater markets, Brazil and West Africa.
Within a fleet of 27 floating rigs are 21 deepwater drilling rigs, including seven rigs delivered since 2008 and another five rigs expected to be delivered between now and 2013.