Ensco and Rowan Companies have announced that they have agreed to combine both companies in an all-stock transaction that values the combined company at US$12 billion.
Under the terms of the deal, Rowan shareholders will receive 2.215 Ensco shares for each Rowan share. Upon closing, Ensco and Rowan shareholders will own approximately 60.5 per cent and 39.5 per cent, respectively, of the outstanding shares of the combined entity.
The definitive transaction agreement was unanimously approved by each company’s board of directors. The Saudi Aramco partner to the ARO Drilling joint venture also consented to the combination between Rowan and Ensco.
Rowan president and chief executive officer Tom Burke, who will serve as president and chief executive officer of the combined company, said, “We are excited to reach an agreement to combine our well-respected organizations, enabling both Rowan and Ensco shareholders to participate in the substantial value creation opportunities of a larger, more technologically-advanced and diverse offshore drilling company."
Ensco president and chief executive officer Carl Trowell, who will serve as executive chairman of the combined company, stated, “The combination of Ensco and Rowan will create an industry leader in offshore drilling across all water depths, with significant advantages to capitalize on future opportunities and better serve our customers. Through this combination, Ensco shareholders will uniquely benefit from Rowan’s strategic joint venture with Saudi Aramco, ARO Drilling, while all stakeholders will share in meaningful cost savings and even greater upside to improving market conditions as the industry recovery continues gaining momentum.”
In a press statement, the firms said that the combined company expects to realise annual pre-tax expense synergies of approximately $150 million, with more than 75 per cent of targeted synergies expected to be realised within one year of closing. As a result, the transaction is projected to be accretive to cash flow per share in 2020 following an anticipated closing in the first half of 2019.
Leslie Cook, principal analyst, Wood Mackenzie, said: “Ensco and Rowan are companies that have strong brand recognition in both the jack-up and floater sectors. What makes a company like Rowan particularly interesting for Ensco is the opportunity to further high-grade their growing portfolio with premium assets and expand their footprint in key markets such as Middle East, Latin America, Europe and US Gulf of Mexico. The combined company will also become the largest player in the jack-up sector. Nearly 40 per cent of the combined portfolio will consist of ultra-harsh and modern harsh-environment assets.”