After offshore drillers Maersk Drilling and Noble Corporation announced their intent to merge, a Noble shareholder stated that it would vote against such a move.
In a mutual statement, Maersk Drilling and Noble Corp. shareholders said that the shares of the combined company would be distributed 50-50 between the current shareholders of the two drillers. The schedule for the proposed transaction completion is in mid-2022.
The transaction is supposed to be completed through an English holding company via a voluntary tender exchange offer to the shareholders of Maersk Drilling. Each Maersk Drilling’s shareholder will, under the exchange offer, get 1.6137 shares in the new holding company for every Maersk Drilling share.
The transaction is supported by major shareholders of both companies, including Noble’s top three shareholders, which own approximately 53 percent of Noble shares, and APMH Invest which currently owns approximately 42 percent of Maersk Drilling shares. Other foundations related to APMH Invest which own around 12 percent of Maersk Drilling have stated that they would support the transaction.
But, Standard Drilling, one of Noble’s shareholders said it would vote against the deal. Standard Drilling, a Cyprus-based, Oslo-listed offshore vessel owner and investment firm, currently owns around 1 percent of Noble Corporation.
Martin Nes, Chairman of the board of directors of Standard Drilling sent a letter to the chairman of Noble Corp. in which he stated that the merger was presented as a merger of equals and that Standard Drilling fully supported industry consolidation in the offshore drilling market but that they, along with other shareholders, were concerned about the proposed exchange ratio and would consider voting against the transaction.
“Standard Drilling fully supports industry consolidation in the offshore drilling market, but in our view, this is not a merger of equals. The transaction between Noble and Maersk Drilling implies a c. 40/60 percent split basis enterprise value and a circa 30 percent premium in the Maersk Drilling share price per its closing value on November 9, 2021,” Nes said.
“We argue the value of 7th generation floaters, of which Noble has 7, should be comparable to CJ70 jack-ups, of which Maersk Drilling has 5. This is due to better rates and utilization presently in the floater market. On this basis, we argue the gross asset values in the two companies are similar. This view is also supported by the multiples in the proposed transaction, with Noble trading at 6x ’22 EV/ EBITDA with 7 percent FCF yield while Maersk Drilling would trade at ‘13x with 1 percent FCF yield.
“Standard Drilling, as a shareholder in Noble, will at the proposed exchange ratio where Maersk Drilling will receive circa 1.614 Noble shares, consider voting against the transaction. We have been contacted by other major shareholders who share our concerns,” he added.
Worth noting, the transaction is subject to Noble shareholder approval, acceptance of the exchange offer by holders of at least 80 percent of Maersk Drilling’s shares, merger clearance and other regulatory approvals, listings on NYSE and Nasdaq Copenhagen, as well as other customary conditions.