Huge rig deal cheers the market

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Norwegian industrialist Kjell Inge Røkke has agreed to sell the oil rig firm he controls, Aker Drilling, to the world’s largest rig company, Transocean. The deal values Aker Drilling at nearly double what it was worth before the weekend and helped boost values on the Oslo Stock Exchange .

Industrialist Kjell Inge Røkke (right) and his chief executive officer Øyvind Eriksen could smile broadly after agreeing to sell Aker Drilling to Transocean of Houston. PHOTO: Aker Drilling

Stavanger-based Aker Drilling announced Monday that it had accepted an offer of NOK 26.50 per share, worth NOK 7.9 billion, from Houston-based Transocean. The offer, reports business website dn.no, is 62 percent higher than Aker Drilling’s average share price over the past month and fully 97 percent above Friday’s closing price of NOK 13.35 per share.

Aker Drilling’s chief executive, Øyvind Eriksen, likened Transocean’s offer to “great recognition” of Aker Drilling’s organization, rigs and prospects. He called Transocean the world’s foremost drilling entrepreneur, and claimed that Transaocean and Aker Drilling can “make each other better.”

Eriksen, one of Røkke’s key executives in the Aker organization Røkke took over himself several years ago, said the deal would strengthen Aker’s economic freedom and yield “more flexibility” in its “goal-oriented work” to further develop Aker’s portfolio of investments. He claimed Aker would now be well-positioned for more growth.

Both of Aker Drilling's deep-water drilling rigs, including the Aker Barents pictured here, are employed on long-term contracts on the Norwegian continental shelf. PHOTO: Aker Drilling

Transocean confirmed that Røkke’s Aker Capital, which owns 41 percent of Aker Drilling’s shares, had accepted Transocean’s offer and that Transocean had secured acceptance from investors holding a total of 60.5 percent of Aker Drilling’s shares.

Eriksen said there were other possibilities from interested bidders, but Transocean was swift in making its offer in cash. The board of Aker Drilling, which has around 440 employees mostly working on its rigs, has recommended that all shareholders accept Transocean’s offer.

Analysts expect the deal will help boost shares of other offshore firms as well, and Seadrill was already up 1.4 percent by midmorning. There was also widespread improvement among other major Norwegian shares Monday morning, with Statoil, Yara, DnB NOR and Norsk Hydro all logging solid gains.

Aker Drilling owns two of the world’s largest and most advanced drilling rigs, the Aker Barents and Aker Spitsbergen, designed to operate in harsh environments and “ultra-deep water.” Aker also has two drillships under construction in Korea.

Transocean owns a large fleet of rigs but ran into tragedy last year when its Deepwater Horizon rig exploded and sank in the Gulf of Mexico. Transocean noted in its press release (external link) that it expected its pending acquisition of Aker Drilling to immediately contribute to earnings and that it would be funded by “existing cash balances and debt facilities.”

Views and News from Norway/Nina Berglund
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