LONDON, UK / ACCESSWIRE / June 1, 2017 / Active Wall St. blog coverage looks at the headline from Ensco PLC (NYSE: ESV) and Atwood Oceanics, Inc. (NYSE: ATW). Ensco announced on May 30, 2017, that it has signed an agreement to acquire Atwood Oceanics in an all-stock transaction. The merger of the two Companies will create a leading global offshore drilling entity with a combined enterprise value of approximately $6.9 billion. Register with us now for your free membership and blog access at:
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Commenting on the acquisition, Carl Trowell, CEO of Ensco said:
"The combination of Ensco and Atwood will strengthen our position as the leader in offshore drilling across a wide range of water depths around the world – creating a broad platform that we can build upon in the future. This acquisition significantly enhances our high-specification floater and jackup fleets, adding technologically advanced drillships and semisubmersibles, and refreshing our premium jackup fleet to best position ourselves for the market recovery."
Rob Saltiel, CEO of Atwood added:
"Both Companies are passionate about operational excellence, safety and customer satisfaction with core values and cultures that are perfectly aligned. We believe the combined Company will offer an unmatched rig fleet and workforce."
Terms of the acquisition
As per the merger agreement, Ensco will pay Atwood's shareholders 1.60 shares of Ensco for each Atwood's share they own. The transaction values each Atwood's share at $10.72, based on Ensco's closing share price of $6.70 on 26 May 2017, the last trading day before the deal was announced. The offer price represents a premium of approximately 33% to Atwood's closing price of $8.08 on the same date.
Once the transaction is completed, Ensco's shareholders will own approximately 69% stake and Atwood's shareholders will own approximately 31% stake in Ensco PLC.
The deal has been approved by the Boards of Directors of both Companies. The transaction is expected to close in Q3 2017 and is subject to approvals from shareholders of both Companies, regulatory approvals, and other closing conditions. Since the deal is an all-stock transaction, there are no financing conditions.
Post-acquisition, the merged Company will continue its business under the Ensco name and will continue to be headquartered in London, UK with top management team located at London, UK and Houston, Texas. The shares of Ensco will continue to be traded at the New York Stock Exchange under the ticker "ESV".
The top management of Ensco will be helmed by Carl Trowell as President and CEO, and he will be supported by Carey Lowe as Executive Vice President and Chief Operating Officer, and Jon Baksht as Senior Vice President and Chief Financial Officer. Paul Rowsey, the current Chairman of Ensco's Board, will continue in his position after the merger. The new merged Company's Board members will include Carl Trowell as well as two representatives from Atwood.
Strategic advantages of the merger
The acquisition is expected to result in pre-tax annual cost synergies of approximately $45 million in FY18 and approximately $65 million for full year 2019 and beyond. Given the various annual cost synergies, the deal is also expected to be accretive to Ensco's discounted cash flow.
After adjusting for Atwood's retiring of outstanding revolving credit facility, the total available liquidity as on March 31, 2017, was $3.9 billion and included $1.6 billion of cash and short-term investments. The merged Company is expected to have a revenue backlog of approximately $3.7 billion. The result is a strong balance sheet for the merged Company.
The Ensco/Atwood merger would result in an offshore drilling Company with a fleet of 63 rigs, comprised of ultra-deepwater drillships, versatile deep- and mid-water semisubmersibles and shallow-water jackups.
The merged Company will be at a competitive advantage with a technologically advanced fleet as well as operational, safety, and technical expertise that will meet the deep- and shallow-water drilling requirements of clients across the globe.
The merged Company will have one of the most diverse drilling operations which will cover the world's most prolific offshore drilling basins across six continents including the Gulf of Mexico, Brazil, West Africa, Middle-East, North Sea, Mediterranean, and Asia/Pacific.
The merged Company will have one of the largest and diversified client base which will include leading national and international oil Companies as well as various independent operators.
Stock Performance
On Wednesday, May 31, 2017, Ensco's stock closed the trading session at $6.24, falling 1.89% from its previous closing price of $6.36. A total volume of 32.80 million shares have exchanged hands, which was higher than the 3-month average volume of 10.61 million shares. The stock is trading at a PE ratio of 2.68 and has a dividend yield of 0.64%. At Wednesday's closing price, the stock's net capitalization stands at $1.92 billion.
At the close of trading session on Wednesday, May 31, 2017, Atwood Oceanics's stock price ended the day flat at $10.04. A total volume of 10.63 million shares were exchanged during the session, which was above the 3-month average volume of 3.76 million shares. The Company's share price has surged 34.22% in the past one month and 21.84% in the previous six months. Shares of the Company have a PE ratio of 7.28 and currently have a market cap of $816.35 million.
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