Oil driller Ensco to buy Pride for $7.3 billion
NEW YORK (Reuters) - Ensco Plc will buy rival Pride International Inc for about $7.3 billion in a deal that will create the world's second-largest offshore oil and gas driller.
The deal, announced by the companies on Monday, sets the purchase price for Pride's shares at $41.60 apiece, a premium of 21 percent to Friday's closing price, and will give Ensco new access to lucrative deepwater markets off Brazil and west Africa.
"Pride and Ensco combined are going to be in all the major oil-producing regions now," said Kurt Hallead, co-head of global energy research at RBC Capital Markets in Austin, Texas.
Offshore drillers were hurt by last year's moratorium on deepwater drilling in the Gulf of Mexico and more stringent regulation on shallow water operations following the BP Plc well blowout, which led to the nation's worst-ever maritime oil spill.
But major energy companies, such as Chevron Corp and Exxon Mobil , are expected to continue spending billions of dollars on new offshore fields, encouraged by the strong oil prices.
With a total of 74 rigs, the deal would lift the combined company past Noble Corp to be the global No. 2 offshore driller behind Transocean Ltd , which owns 136 rigs.
Ensco's fleet is deployed in the Gulf, Europe, the Middle East and Asia, and the deal will add Pride's nine rigs in Brazil and five rigs off the west coast of Africa.
The new company would have 21 deepwater drilling rigs, equal to Noble's fleet and behind Transocean's 44, but would still have a strong position in the most lucrative segment of the offshore market, which often pays rig owners more than $500,000 per day.
Ensco said it has six rigs under construction, which will absorb much of the new company's cash flow over the next few years. It has taken delivery of 12 new vessels over the past few years.
The industry is expected to see aggressive merger and acquisition activity in the coming months and years as companies scramble to increase their size and market share and challenge Transocean, which itself bought GlobalSanteFe in 2007 for about $15 billion.
SAVINGS EXPECTED
The combined company, which would be headquartered in Britain, would likely realize annual cost savings of $50 million from 2012. The deal is expected to add to Ensco's earnings per share in 2011 and 2012.
Houston-based Pride, which is 9.5 percent owned by Norwegian Seadrill Ltd , has been searching for a buyer since last year, according to reports.
Pride stockholders will receive 0.4778 newly issued Ensco shares plus $15.60 cash for each share of Pride common stock.
The deal will be financed through a combination of existing cash on the balance sheet and newly issued Ensco shares and debt. Total cash paid to Pride shareholders will be about $2.8 billion.
London-based Ensco has received commitments from Deutsche Bank Securities Inc and Citibank to finance the incremental debt required for the transaction.
Ensco's lead adviser for the transaction was Deutsche Bank Securities Inc, and Citi also served as financial adviser, while Baker & McKenzie LLP acted as its legal adviser.
Pride was advised by Goldman, Sachs & Co and its legal advisers are Baker Botts LLP and Wachtell, Lipton, Rosen & Katz.
Pride's shares were up 15.7 percent, or $5.40, at $39.79 at mid-day, while Ensco's shares were down 4.8 percent, or $2.59 to $51.80.
(Additional reporting by Michael Erman and Braden Reddall in San Francisco; Editing by Maureen Bavdek and Steve Orlofsky)