Less than a month after oil services giant Schlumberger dropped its merger deal with Eurasia Drilling Co. (EDC), the Russian company announced that it received another potential merger offer that could send Eurasia to the private sector.
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Image from Eurasia. |
Eurasia’s board of directors received the proposal from certain management and core shareholders today (8 October) for US$10.00 per share, which spurred a special committee to negotiate the proposition.
The committee, made up of Earl of Clanwilliam as chairman, and Dr. Alexander Shokhin and Dr. Igor Belikov, will make their recommendation to the board to accept or reject the proposal.
With the failed Schlumberger merger, Eurasia said that certain management and core shareholders seek to undertake significant rationalization of the business that would best be achieved by taking the company private, so it can sustain itself through the expected prolonged and difficult market conditions.
“While EDC's fundamentals are still robust in the long-term, the current performance is significantly impacted by a combination of challenging macro-economics, acceleration in ruble depreciation, continued geopolitical risks, upstream capex cuts by the Russian oil majors on the back of oil price pressure, compounded by changes in tax regulations for the oil sector, weak pricing for drilling, poor forward visibility on offshore activity and uncertainty in the services market stemming from sanctions. Given all of these challenges, the management of EDC believes they require maximum flexibility to manage the business, which is best facilitated by being a private company at this time. As cost management becomes a foremost priority, going private also releases material financial benefit,” Eurasia said in a statement.
"The board is focused on preserving shareholder value following the failure of the Schlumberger transaction which would have been extremely beneficial to shareholders. The cancellation of this transaction is particularly unfortunate given all the challenges EDC is now facing. We are currently reviewing the merger proposal with the assistance of professional advisers and we will make our recommendation to the board in due course," Clanwilliam said.
Late last month, Schlumberger pulled the plug on its proposed $1.7 billion acquisition of Eurasia, to focus on other opportunities. The failed agreement, which was signed in January 2015, would have seen Schlumberger acquire a minority interest of 45%.
The deal had seen several extensions and was originally set to close in 1Q 2015. It was pending confirmation from the Russian Federal Anti-Monopoly Service and the Government Commission on Monitoring Foreign Investment.
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