Offshore drilling contractors Ensco plc (NYSE:ESV) and Pride International, Inc. (NYSE:PDE ) say that they have entered into a definitive merger agreement under which London-headquarterd Ensco will combine with Houston-headquartered Pride in a cash and stock transaction valued at $41.60 per share based on Ensco’s closing share price on February 4, 2011. The implied offer price represents a premium of 21% to Pride’s closing share price as of the same date and a premium of 25% to the one month volume weighted average closing price of Pride.
The transaction will create the second largest offshore driller in the world with 74 rigs. The combined fleet will have 21 ultra-deepwater and deepwater rigs, forming the second largest/youngest fleet able to drill in water depths of 4,500 feet or greater. In addition, the combined company will have more active jack-up rigs than any other driller. Mid-water rigs will represent 8% of the combined fleet.
The definitive merger agreement was unanimously approved by each company’s board of directors.
Under the terms of the merger agreement, Pride stockholders will receive 0.4778 newly-issued shares of Ensco plus $15.60 in cash for each share of Pride common stock. Upon closing, and reflecting the issuance of new Ensco shares, Pride stockholders collectively will own approximately 38% of Ensco’s outstanding shares.
Ensco expects the combined company to realize annual pre-tax expense synergies of at least $50 million for full year 2012 and beyond. The combination is projected by Ensco management to be immediately accretive to Ensco earnings and cash flow per share before synergies.
Based on the closing price of each company’s shares on 4 February 2011, the estimated enterprise value of the combined company is $16 billion. The total estimated revenue backlog for the combined company is approximately $10 billion.
Ensco plc’s Chairman, President and Chief Executive Officer, Dan Rabun, stated, “The combination is an ideal strategic fit, as our rig types, markets, customers and expertise complement each other with minimal overlap. Pride has gained valuable expertise building and operating ultra-deepwater semisubmersibles and drillships and has strong relationships with leading customers in Brazil and West Africa, two of the fastest-growing deepwater markets in the world. Ensco is a leading provider of premium jack-ups and ultra-deepwater semisubmersible rigs with a major presence in the North Sea, Southeast Asia, North America and the Middle East. Together, we will form an even stronger company that is ideally positioned to capitalize on growth opportunities within our industry.”
Pride International’s President and Chief Executive Officer Louis Raspino added, “The combination of Pride and Ensco creates an offshore contract driller with many of the attributes needed to ensure long-term success in our business. I have always been an advocate of scale, believing that a company with critical mass is afforded numerous benefits, including operational efficiencies, marketing advantages and the ability to attract and retain talented individuals that will help to secure a strong future for our company.”
Dan Rabun will remain Chairman, President and CEO and James W. Swent will continue as Senior Vice President and CFO. The remaining executive management team for the combined company will be named at a later date and is expected to be composed of executives from both Ensco and Pride.
Ensco’s eight board members will continue to serve as directors of the combined company and two Pride directors will be appointed to an expanded board effective at closing.
The combined company, which will retain the name Ensco plc, will remain domiciled in the U.K. Virtually all of the senior executive officers will be located in London. The combined company is anticipated to realize significant benefits similar to those already achieved by Ensco since its redomestication to the U.K in 2009. These benefits include greater access to major customers, enhanced oversight of global operations due to improved time zone overlap, increased access to European institutional investors and a more competitive tax position.
The transaction is subject to approval by the shareholders of Ensco and Pride, as well as other customary closing conditions. The transaction is not subject to any financing condition. Ensco and Pride intend to file a joint proxy statement/prospectus with the Securities and Exchange Commission as soon as possible. The companies anticipate that the transaction could close as soon as the second quarter of 2011.
February 7, 2011