Publish Date : 18-Aug-2017
Transocean Ltd. ("Transocean" or the Company) has reached an agreement with Songa Offshore SE (Songa Offshore) whereby it will, subject to certain conditions, make a Voluntary Exchange Offer (the Offer) to acquire 100 percent 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 Offshores 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 NOK 9.1 billion (USD $1.2 billion), and an enterprise value of approximately NOK 26.4 billion (USD $3.4 billion).
The transaction strengthens Transoceans industry-leading position with the addition of Songa Offshores four Cat-D harsh environment, semisubmersible drilling rigs on long-term contracts with Statoil in Norway. Songa Offshores 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 USD $40 million.
The combined company will operate a fleet of 51 mobile offshore drilling units with backlog of USD $14.3 billion 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 Transoceans strategy of recycling older less capable rigs, Transocean anticipates re-ranking the combined fleet, which may result in additional rigs being recycled.
Jeremy D. Thigpen, President and Chief Executive Officer 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 USD $4.1 billion in contract backlog to our already industry-leading backlog of USD $10.2 billion, which provides us with even more visibility to future cash flows in this challenging market.
Thigpen added, We look forward to consummating the transaction and elevating the operational and financial performance of the combined company, creating incremental value for our customers and shareholders.
Frederik Wilhelm Mohn, Chairman of Songa Offshore, said: "The combination of Songa Offshore and Transocean is a strategic fit. The combined company will have an unparalleled backlog backed by strong counterparties. By adding Songa Offshore's four Cat-D rigs to Transocean's existing harsh environment fleet, the combined company will be the leader within this segment which is showing signs of recovery."
Transaction Details
The transaction is recommended by Songa Offshores board of directors and certain members of the senior management team, in addition to Songa Offshore shareholders Perestroika AS (Perestroika), funds beneficially owned by Asia Research & Capital Management Ltd., and York Capital Management Global Advisors, LLC, which collectively beneficially own 76.6% of Songa Offshores 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.
Additionally, assuming the cash for equity component described below is fully exercised by the remaining shareholders the transaction will have the estimated values described below.
Total transaction value of approximately USD $3.4 billion, including premium, comprises:
USD $1.7 billion net assumed Songa Offshore debt
USD $660 million estimated Transocean Inc. convertible bond
USD $540 million estimated Transocean Ltd. equity
USD $480 million estimated Transocean cash
As part of the transaction, Songa Offshores legacy fleet loan, and a portion of its unsecured bonds including the associated swaps are expected to be retired with cash. Songa Offshores remaining unsecured bonds and Perestroikas shareholder loan will be satisfied with convertible bonds issued by Transocean Inc., as described below. The Songa Offshore Cat-D secured credit facilities will be assumed by Transocean, or refinanced as determined at a future date.
Additional Transaction Elements
Terms of the Offer to Songa Offshore shareholders:
Songa Offshore shareholders will receive consideration comprised of 50% Transocean Ltd. newly issued shares and 50% in convertible bonds exchangeable into new shares in Transocean Ltd.
The exchange ratio is equal to 0.7145 times, based on the Transocean Reference Price of USD $8.39 per share and a USD/NOK exchange ratio of 7.9239 as per close August 14, 2017.
Cash Option - Each Songa Offshore shareholder may elect to tender up to 2,631 Songa Offshore shares under the Offer for cash of NOK 47.50 per share, i.e. up to a total of NOK 125,000 in cash per Songa Offshore shareholder.
Terms of Transocean Inc.s convertible bond:
Senior unsecured
Issued at par
Matures five years from issue
Coupon of 0.5% per annum paid semi-annually
Exchangeable into shares in Transocean Ltd.
The Reference Price is USD $8.39 per share
The Exchange Price will be set at a 22.5% premium to the underlying Reference Price
Non-callable for the life of the instrument
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