Hercules Offshore, Inc. entered into a definitive merger agreement pursuant to which Hercules Offshore will acquire 100% of the outstanding stock of TODCO in a stock and cash transaction valued at approximately $2.3 billion. The Company expects the transaction will:
· Create the world's fourth largest jackup fleet
· Establish Hercules Offshore as a leader in both barge drilling and liftboats
· Expand Hercules Offshore's geographic footprint, enhancing international growth opportunities and further diversifying the Company's operations
The combined company will operate a fleet of 33 jackup rigs, 27 barge rigs, 64 liftboats, three submersible rigs, nine land rigs and one platform rig and have operations in ten different countries on five continents.
The boards of directors of Hercules Offshore and TODCO unanimously approved the transaction. Closing of the transaction is subject to regulatory approvals and other customary conditions, as well as both Hercules Offshore and TODCO shareholder approval.
Randy Stilley, Chief Executive Officer, President and Director of Hercules Offshore, stated, "This transaction positions Hercules Offshore as one of the leading shallow water oil service providers globally. We intend to leverage the strong organizations of both Hercules Offshore and TODCO to create long- term value for our companies' shareholders, customers and over 3,900 employees. Looking forward, Hercules Offshore will continue to focus on seeking strategic growth opportunities, expanding our geographic diversity and maintaining our status as a low-cost provider, while preserving our conservative and disciplined financial management."
Jan Rask, President, Chief Executive Officer and Director of TODCO, commented, "We are very pleased with the signing of this agreement with Hercules Offshore and believe this transaction maximizes value for shareholders. Shareholders have an opportunity to realize cash while continuing to participate in a robust offshore drilling market through an entity with a balanced capitalization. In addition, we believe the Hercules Offshore management team has proven acquisition and integration capabilities and will continue to capitalize on growth opportunities that exist in the fragmented offshore jackup drilling market."
Following the transaction, the Hercules Offshore senior management team will continue, under the leadership of Randy Stilley, to be governed by the Hercules Offshore board of directors, which will include three TODCO directors.
Under the terms of the agreement, TODCO shareholders will receive average total consideration equal to 0.979 shares of Hercules Offshore and $16.00 in cash for each share of TODCO common stock outstanding, or an estimated 56.9 million shares of Hercules Offshore and cash of $930.7 million. This represents $42.01 per share of consideration to be received by the TODCO shareholders based on the closing price of Hercules Offshore on March 16, 2007, and represents a premium of approximately 28% to TODCO's closing price on March 16, 2007 and 25% to the average closing price over the last 30 days. The exact amount of the cash and stock consideration to be received by each TODCO shareholder will be determined by elections and an equalization formula.
It is anticipated that the transaction will be tax free to TODCO and the stock portion of the consideration will be received tax free by its shareholders.
Upon completion of the transaction, which is expected to be in mid-2007, it is anticipated that TODCO shareholders will own approximately 64%, and that Hercules Offshore shareholders will own approximately 36% of the combined company.
Hercules Offshore will fund its acquisition of TODCO through
existing cash on hand and a senior secured term loan facility which has been underwritten by UBS Investment Bank. The Company plans to use cash from operations in the years ahead to expeditiously repay the fully pre-payable term loan.
UBS Investment Bank acted as lead financial advisor, and Simmons & Company International acted as financial advisor and provided the fairness opinion to the Board of Hercules Offshore and Andrews Kurth LLC acted as principal legal advisor to Hercules Offshore for this transaction. Citigroup
Corporate and Investment Banking acted as financial advisor and Porter & Hedges LLC acted as principal legal advisor to TODCO.