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Ensco, Atwood shareholders approve merger

Written by  Thursday, 05 October 2017 10:02

Ensco plc announced today (5 October) that Ensco shareholders voted to approve the allotment and issuance of Ensco Class A ordinary shares to shareholders of Atwood Oceanics in connection with the all-stock acquisition of Atwood at the company’s general meeting of shareholders today.

Atwood Oceanics headquarters. Source: Atwood

The final results of the general meeting of shareholders held today indicate that 65% of the shares cast at the meeting voted in favor of this proposal.

 “We are extremely pleased that Ensco shareholders recognized the strategic and financial merits of our combination with Atwood. This transaction is a significant milestone for Ensco as we continue to execute our strategic plan to emerge from the market downturn as the clear leader in the offshore drilling sector, said Carl Trowell, Ensco’s president and chief executive officer, in a 5 October press statement.

“By acquiring Atwood at a pivotal time in the market cycle, we are purchasing high-quality assets at compelling prices as values for the highest-specification assets are at a critical inflection point. Additionally, these high-specification assets will further our ability to meet increasing customer demand and strengthen our competitive position, which coupled with significant expected synergies, will generate meaningful, long-term value for all shareholders,” Trowell commented.

Separately, Atwood announced today that its shareholders voted to adopt the merger agreement with Ensco at a special meeting of Atwood shareholders.  More than 98 percent of votes cast and 70 percent of shares outstanding were voted in favor of the transaction, Atwood reported in a 5 October press statement.

The companies anticipate the closing of the transaction will occur within one business day, assuming all other customary closing conditions are met.

Under the merger agreement, Atwood shareholders will receive 1.60 shares of Ensco for each share of Atwood common stock for a total value of $10.72 per Atwood share based on Ensco’s closing share price of $6.70 on 26 May 2017. Upon close of the transaction, Ensco and Atwood shareholders will own approximately 69% and 31%, respectively, of the outstanding shares of Ensco plc.

Announced in May of this year, the combined company will have a fleet of 63 rigs, comprised of ultra deepwater drillships, versatile deep- and mid-water semisubmersibles and shallow water jackups, along with a diverse customer base of 27 national oil companies, supermajors and independents.

Within the fleet of 26 floating rigs (semisubmersibles and drillships) are 21 ultra-deepwater drilling rigs, capable of drilling in water depths of 7500ft or greater, with an average age of five years – establishing this fleet among the youngest and most capable in the industry, Ensco said in May. The company also will have the largest jackup fleet worldwide of 37 rigs, including 27 premium units.

Evercore ISI analysts believe Ensco is one of the better positioned offshore drillers for a potential market recovery commencing in 2018. The company successfully navigated through the market downturn and is positioning for the recovery by continuing to high-grade its fleet, aligning with select customers in key geographic basins, and preserving liquidity for additional opportunities.

“With the acquisition of Atwood now complete, we expect the company to execute on its integration plans and achieve increased cost synergy targets of $60 million in 2018 and $80 million in 2019 for more than $585 million in present value of future savings after factoring $100 million of transaction costs,” Evercore-ISI analysts said in a 5 October research note.

“Although the company is advancing capex spending and taking on ATW debt, we expect Ensco to continue generating strong cash flow from operations over the next couple of years as the offshore drilling market works through a slow but steady recovery,” the analysts said.

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