Transocean, GlobalSantaFe agree to merger of equals

Offshore Drilling contractors Transocean Inc. and GlobalSantaFe Corp. have agreed to a merger of equals, creating a company valued at about $53 billion.

By OGJ editors
HOUSTON, July 23 -- Offshore Drilling contractors Transocean Inc. and GlobalSantaFe Corp. have agreed to a merger of equals, creating a company valued at about $53 billion.

The combined company, to be known as Transocean Inc., will retain principal offices in Houston. It will have a global fleet of 146 rigs and provide a full range of offshore drilling services in the world's key regions. It will have a substantial presence in ultradeep and deepwater drilling and additional growth from newbuild rigs.

Robert L. Long, who will continue as chief executive officer of Transocean, said, "This transaction will enhance our high-end floater fleet, including five newbuild ultradeepwater units, while growing our position in the worldwide jack up market, especially in the Middle East, West Africa, and North Sea."

Under terms of the agreement, Transocean shareholders will receive $33.03 in cash and 0.6996 share of the combined company for each Transocean share. GlobalSantaFe shareholders will receive $22.46 in cash and 0.4757 share of the combined company for each GlobalSantaFe share.

The aggregate total cash paid to both companies' shareholders will be $15 billion, which will be funded through a bridge loan due 1 year after closing, which is expected by yearend, subject to the approval of both companies' shareholders, regulatory clearances, receipt of funds under the committed financing, and other closing conditions.

Transocean has received a commitment letter from Goldman, Sachs & Co. and Lehman Bros. Inc. providing for this financing. Transocean expects to refinance the bridge loan with a mix of bank loans and debt securities.

The new company also will have a $33 billion revenue backlog. And the company intends to dedicate its first 2 years of free cash flow to reducing debt.

Following the merger, GlobalSantaFe Chairman Robert E. Rose will serve as chairman of Transocean, Transocean's Chief Executive Officer Robert L. Long will continue in his role, and Jon A. Marshall will assume the position of president and chief operating officer.

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