RIG $136.38 Transocean, GlobalSantaFe Complete Deal
Tuesday November 27, 5:34 pm ET
By John Porretto, AP Business Writer
Transocean, GlobalSantaFe Complete Combination; Fitch Downgrades Company
HOUSTON (AP) -- Transocean Inc., the world's largest offshore drilling contractor, got even bigger Tuesday as it closed a multibillion-dollar deal for smaller competitor GlobalSantaFe Corp., creating a company able to drill globally from shallow to ultra-deep waters.
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One credit-rating agency immediately downgraded Transocean, citing in part the large debt it assumes as part of the transaction.
The deal, announced by the Houston-based companies in July, includes a $15 billion cash payout to shareholders of both companies funded through a bridge loan. The value of the new company is about $60 billion, including roughly $18 billion in debt.
It retains the Transocean name and trades on the New York Stock Exchange under Transocean's symbol "RIG."
Fitch Ratings downgraded Transocean from "BBB+" to "BBB" -- two notches above "junk" status. Among the concerns Fitch cited were the $15 billion payout and the possibility future acquisitions could reduce cash flow and extend debt repayments. Standard & Poor's, meanwhile, affirmed its "BBB+" rating.
Despite the downgrade, Transocean shares rose $6.36, or nearly 5 percent, to close at $135.75 Tuesday after hitting an annual high of $137.59 earlier in the day.
On Monday, U.K. regulators gave their approval to the deal after the companies agreed to sell two GlobalSantaFe rigs in the North Sea to resolve antitrust concerns.
"Even without these two floaters, the consolidated company will remain the dominant player in the offshore drilling universe," Raymond James & Associates said in a research note Tuesday.
Analysts have said Transocean's new girth could lead to other combinations in the industry.
The combined company has 140 mobile offshore drilling rigs, including harsh-environment jackups for shallower waters and ultra-deepwater drillships. It has eight additional ultra-deepwater rigs under construction.
Transocean Chief Executive Robert Long, who will continue as CEO of the combined company, has said the deal allows the company to keep pace as the industry expands and assures it of a leading presence in almost every major offshore drilling province in the world.
It also gives Transocean a broader customer base, particularly with state-owned national oil companies, which control almost 90 percent of global oil reserves, and greater exposure in the growing and lucrative deepwater drilling market.
Under terms of the deal, Transocean shareholders will receive $33.03 cash and 0.6996 shares of the combined company for each share of Transocean they own. Shareholders of GlobalSantaFe will receive $22.46 cash and 0.4757 shares of the new company for each share of GlobalSantaFe they own.
There will be about 316 million shares outstanding of the combined company after the transaction.
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