9:30 AM
Oil driller Ensco to buy Pride for $7.3 billion
Addison Ray
By Matt Daily
NEW YORK | Mon Feb 7, 2011 10:16am EST
NEW YORK (Reuters) - Ensco Plc (ESV.N) will buy its rival Pride International Inc (PDE.N) for about $7.3 billion in a deal that would create the world's second-largest offshore oil and gas driller, according to the companies.
The deal announced on Monday sets the purchase price for Pride's shares at $41.60 apiece, a premium of 21 percent to Friday's closing price.
Offshore drillers had been hurt by last year's moratorium on deepwater drilling in the Gulf of Mexico and more stringent regulation on shallow water operations following the BP Plc (BP.L) well blowout that led to the nation's worst-ever maritime oil spill.
But major energy companies, such as Chevron Corp (CVX.N) and Exxon Mobil (XOM.N), are expected to continue spending billions of dollars on new offshore fields, encouraged by the strong U.S. oil prices, which are hovering near $90 per barrel.
The deal would lift the combined company past Noble Corp (NE.N) to be the global No. 2 offshore driller behind Transocean Ltd (RIGN.VX).
James West, an analyst with Barclays Capital, said in a note to investors the deal was "a good strategic transaction" for Ensco because it increased its hold in the lucrative deepwater drilling market.
It also gives Ensco greater leverage to the Brazilian market, one of the fastest growing basins in the world, he said.
The combined company, which would be headquartered in Britain, would likely see annual expense savings of $50 million from 2012. The deal is expected to be accretive to Ensco's earnings per share in 2011 and 2012.
Houston-based Pride, which is 9.5 percent owned by Norwegian Seadrill Ltd (SDRL.OL), has been searching for a buyer since last year, according to reports.
Pride stockholders will receive 0.4778 newly issued shares of Ensco plus $15.60 in cash for each share of Pride common stock.
The deal will be financed through a combination of existing cash on the balance sheet and newly issued Ensco shares and debt. Total cash paid to Pride shareholders will be about $2.8 billion.
London-based Ensco has received commitments from Deutsche Bank Securities, Inc and Citibank N.A. to finance the incremental debt required for the transaction.
Ensco's lead adviser for the transaction was Deutsche Bank Securities Inc, and Citi also served as financial adviser, while Baker & McKenzie LLP acted as its legal adviser.
Pride was advised by Goldman, Sachs & Co. and its legal advisers are Baker Botts L.L.P. and Wachtell, Lipton, Rosen & Katz.
Pride's shares soared 17.1 percent, or $5.89, to $40.28 in early trading, while Ensco's shares fell 3.5 percent, or $1.92, to $52.53.
(Reporting by Matt Daily, editing by Maureen Bavdek)
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