The boards of directors of Transocean Inc. and GlobalSantaFe Corp. have unanimously approved a definitive agreement for a merger of equals. The combined entity -- to be known as Transocean Inc. and continue trading under symbol "RIG" on the NYSE -- has an enterprise value of around $53 billion, based on Friday's closing share prices. Transocean shareholders will receive $33.03 in cash and 0.6996 shares of the combined company for each share of Transocean they own. GlobalSantaFe shareholders will receive $22.46 in cash and 0.4757 shares of the combined company. The total number of shares outstanding post-merger will be around 318 million. Shareholders of both firms will receive an aggregate payment of $15b in cash financed by a bridge loan. Cost reduction opportunities totaling $100m - $150m are targeted by 2010. "GlobalSantaFe's outstanding rig fleet complements Transocean's ... we will be positioned to better offer the full scope of drilling services to customers in all geographical areas," said Robert L. Long who will remain Transocean's CEO. Goldman Sachs advised Transocean and Lehman Brothers advised GlobalSantaFe.
Sources: Press release, MarketWatch
Commentary: Oil Prices and Gasoline Prices: A Noteworthy Divergence • Deep Sea Drilling: A Risk Worth Taking? • Transocean: A Case Study of Risk vs. Reward
Stocks/ETFs to watch: GlobalSantaFe Corp. (NYSE:GSF), Transocean Inc. (NYSE:RIG). Competitors: Noble Corp. (NYSE:NE), Diamond Offshore Drilling Inc. (NYSE:DO). ETFs: Oil Services HOLDRs (NYSEARCA:OIH), PowerShares Dynamic Oil & Gas Services (NYSEARCA:PXJ), iShares Dow Jones US Oil Equipment Index (NYSEARCA:IEZ)
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