Oil-industry services provider Schlumberger Ltd. said on Tuesday, Jan. 20, that it will acquire almost 46% of Eurasia Drilling Co. Ltd. for $1.7 billion and has an option to buy the remaining shares as part of a deal that will result in the Russian target abandoning its London listing. Under the terms of the deal, Schlumberger will provide a $991 million loan to a Cayman Islands-registered investment vehicle created by Eurasia's two biggest shareholders: Eurasia CEO and founder Alexander Djaparidze and Alexander Putilov. The pair, who together own about 54.35% of Eurasia, will use the loan to buy out minority shareholders at $22 per share ahead of delisting the company. Once the company is in private hands the loan will convert into equity at a strike price of $22 per share and Schlumberger will acquire a further 14.98% stake, also at $22 per share, to increase its holding to 45.65%. Houston and Paris-headquartered Schlumberger also agreed to pay $176 million for a call option giving it the right to buy the stakes owned by Djaparidze and Putilov during a two-year window that will commence three years from the closing of the initial deal. The investment in Russia's largest provider of drilling services is a rare vote of confidence in Russia's oil sector, which has been battered by western sanctions linked to the Ukraine conflict. Schlumberger is taking advantage of the uncertainty created by those sanctions, and a sharp fall in oil prices, to launch a bid for Eurasia after the target's shares tumbled 71% over the past year to close on Monday at $12.15. Schlumberger's offer of $22 per share represents a 81% premium over that closing price. The acquisition comes with risks beyond sanctions too. The collapse of oil prices, down about 55% over the past year, has led oil companies to cut spending on drilling, eroding service companies' earnings. Eurasia said in early December that it expected to post 2014 sales of about $3 billion, down 11% year-on-year. The company had net debt of $473 million on Sept. 30. RBC Capital Markets LLC analyst Kurt Hallead noted that the transaction values Eurasian at about six times forward Ebitda and is likely to be "marginally accretive" to Schlumberger immediately, boosting quarterly earnings per share by 1 cent to 2 cents. "This deal should not violate the recent sanctions in the Russian energy sector because Eurasia's business is all conventional land rigs, not shale or deepwater," he added. Shareholders are due to vote on the deal on Feb. 16. The deal needs the support of two-thirds of Eurasia shareholders, a hurdle that shouldn't pose a problem as the holders of 69.33% of its shares have already committed to vote in favor of the deal, the company said. Eurasia expects to leave the London exchange on Feb. 23. The terms of the offer were negotiated by an independent directors'committee led by Eurasia Chairman Patrick Meade. The commitee has tapped Vinson & Elkins RLLP and Maples and Calder to provide legal counsel. Sberbank CIB is providing financial advice to the committee. Xenon Capital Partners LLC is providing financial advice to the Russian shareholders' buyout vehicle, called EDC Acquisition Company Ltd. The buyout vehicle is taking legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP's Danny Tricot and Alexey Kiyashko, and from Walkers Global. Schlumberger tapped an Allen & Overy LLP team led by Jeremy Parr in London and Anton Konnov in Moscow, and Bermuda-based Appleby for legal counsel. Read more from:
Click to view a price quote on SLB. Click to research the Energy industry.
from Latest TSC Headlines http://ift.tt/1yFmCKe
No comments:
Post a Comment