March 31, 2008
Rowan to sell LeTourneau
Rowan Companies, Inc. (NYSE:RDC) today announced that its Board has decided to "pursue a monetization of" its wholly-owned manufacturing subsidiary, LeTourneau Technologies, Inc. (LTI). Rowan will be assisted in this matter by its financial advisors, Lehman Brothers, Inc. and Morgan Stanley & Co. Incorporated."
The decision to sell LeTourneau is apparently in response to pressure from investment group Steel Partners II.
One source calls Steel Partners, headed by Warren Lichtenstein, "a successful activist hedge fund' and Mr. Lichtenstein as "famous as a demanding investor [who] exercises shareholder rights whenever he feels necessary." Another calls him "a hard-nosed corporate raider with a talent for finding value."
Rowan said today that "in connection with this announcement, Rowan and Steel Partners II, L.P. have entered into an agreement pursuant to which Steel Partners has withdrawn its slate of three nominees for election to Rowan's Board of Directors at Rowan's 2008 Annual Meeting of Stockholders. The agreement also provides that if Rowan does not monetize its LTI investment by the end of 2008, either Warren Lichtenstein or another person designated by Steel Partners will be added to Rowan's Board effective January 1, 2009. Rowan also agreed that if the LTI monetization is accomplished through an initial public offering of LTI shares or a private sale of LTI, Rowan will repurchase at least $400 million of its outstanding common stock."
Daniel F. McNease, Chairman and Chief Executive Officer of Rowan, stated: "LTI's leading market positions in its operating segments have enabled it to generate significant returns for Rowan over time. Given LTI's record performance in 2007 and strength heading into 2008, we believe that now is the appropriate time for Rowan to crystallize the value we have created in LTI for the benefit of our stockholders."
Rowan says it "does not expect to disclose further developments regarding the process until the completion of a review and decision by the Board of Directors regarding a transaction or course of action."
LTI has manufacturing facilities in Longview and Houston, Texas and Vicksburg, Mississippi that collectively produce mining, timber and transportation equipment, alloy steel and steel plate, and drilling rigs and various rig components. Featured drilling products include complete jack-up rigs, rig kits and component packages, primary drilling equipment such as mud pumps, drawworks, top drives, and rotary tables, and electrical components such as variable-speed motors and drives.
LTI built the first offshore jack-up drilling rig in 1955 and has designed or built more than 200 rigs since, including all 21 in the Rowan fleet and nine additional Rowan rigs under construction or on order. LTI has led the strategic expansion and upgrade of Rowan's drilling fleet over the past decade and, in recent years, has expanded product lines, increased external sales and improved contributions to the Rowan's operating results.