Ensco to buy Atwood Oceanics in all-share deal

Ensco has agreed to buy Atwood Oceanics in an all-share transaction that would create a combined entity worth around $6.9bn.

Under the terms of the merger agreement, which has been unanimously approved by the boards of both offshore drillers, Atwood shareholders will receive 1.60 shares of Ensco for each of their common stock for a total value of $10.72 per Atwood share. This represents a premium of around 33% to Atwood's closing price on 26 May. Once the deal has closed, Ensco and Atwood shareholders will own approximately 69% and 31%, respectively, of the outstanding shares of Ensco.

Ensco expects to realise annual pre-tax expense synergies of around $65m for full-year 2019 and beyond, while cost synergies are projected to be more than $4m and the deal is anticipated to be accretive on a discounted cash flow basis. The companies reckon expense savings will be made through the consolidation of offices that include corporate staff departments and shore-based operations in overlapping markets, as well as the standardisation of systems, policies and procedures across the organisation.

Carl Trowell, chief executive 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. We believe that the purchase price for these assets represents a compelling value to our shareholders, which is augmented further by expected synergies from the transaction.”

Atwood's chief executive Rob Saltiel said the combination is "an ideal strategic fit".

"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. These attributes, anchored by a strong balance sheet, should enable the company to thrive as market conditions improve and allow Atwood shareholders to fully participate in the market recovery.”

At 1445 BST, Ensco shares were down 4.9% to $6.37 while Atwood shares were up 24% to $10.00.