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Hercules Offshore announced yesterday that it had signed a definitive agreement to buy TODCO, the U.S. Gulf's largest fleet of shallow-water rigs, in a cash and stock offer.the When the dust settles on the deal, TODCO shareholders will own 64% of the merged company and Hercules shareholders will own the remaining 36%. Hercules offered 0.979 of its shares plus $16 in cash for the much larger TODCO, valuing the company at $2.3 billion, or $42.01 as of its closing price Friday. TODCO shares rose $6.46, or 19.71%, to $39.24 on news of the merger; Hercules shares fell 10% in intraday trading to pierce 52-week lows before recovering to a loss of just $1.25, or 4.70%, to $25.32. According to Hercules CEO Randy Stilley, "this transaction positions Hercules Offshore as one of the leading shallow water oil service providers globally." The merged company will operate in 10 countries; Hercules is funding the merger largely through a senior secured term loan facility underwritten by UBS.

Sources: Press Release, Bloomberg, TheStreet.com, MarketWatch
Commentary: Cramer's Take on HEROStill Cautious on Gulf of Mexico Driller Stocks
Stocks/ETFs to watch: Hercules Offshore, Inc. (NASDAQ:HERO), TODCO (THE). Competitors: Parker Drilling Company (NYSE:PKD), Transocean Inc. (NYSE:RIG), Noble Corporation (NYSE:NE), Diamond Offshore Drilling (NYSE:DO), Pride International, Inc. (NYSE:PDE), Helmerich & Payne, Inc. (NYSE:HP), GlobalSantaFe Corporation (NYSE:GSF)
Related: A Nicely Rigged Drilling Combo - Motley Fool

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Source: TODCO Shares Surge On Hercules Buyout