Transocean LTD (NYSE:RIG) and Transocean Partners LLC (NYSE:RIGP) announced that Transocean has agreed to acquire all of the outstanding common units of Transocean Partners not already owned by Transocean in a share-for-unit merger transaction. In the merger, Transocean Partners common unitholders will receive 1.1427 Transocean shares for each Transocean Partners common unit. The Transocean Partners unit price implied by the exchange ratio represents a 15% premium to Transocean Partners’ closing price on July 29, 2016. Transocean expects to issue approximately 22.7 million shares in the merger. Completion of the transaction is conditioned upon approval by Transocean Partners’ common unitholders and is anticipated to close in the fourth quarter of 2016.
Following completion of the transaction, Transocean Partners will be 100% owned by Transocean and therefore Transocean will have indirectly acquired the 51% ownership interests in the Discoverer Inspiration, the Discoverer Clear Leader and the Development Driller III that are currently owned by Transocean Partners. Additionally, Transocean Partners’ common units will cease to be publicly traded on the NYSE.
“We are excited about this merger, as it provides significant and immediate benefits to Transocean in the form of simplified administration and governance, tangible cost savings and improved liquidity,” said Jeremy Thigpen, President and Chief Executive Officer of Transocean. “The contemplated all-equity transaction is entirely consistent with Transocean’s current liquidity objectives.”
“Transocean Partners common unitholders will benefit from a premium to the current unit price and receive shares in an entity with significant financial flexibility, a demonstrated access to capital and meaningfully improved market liquidity of its shares,” said Kathleen McAllister, Chief Executive Officer and Chief Financial Officer of Transocean Partners. “Additionally, we expect that common unitholders will also benefit from Transocean’s significantly larger and more diverse fleet and its industry-leading contract backlog.” (Original Source)
Shares of Transocean LTD closed last Friday at $10.99, up $0.25 or 2.33%. RIG has a 1-year high of $17.19 and a 1-year low of $7.67. The stock’s 50-day moving average is $11.60 and its 200-day moving average is $10.29.
On the ratings front, Transocean has been the subject of a number of recent research reports. In a report issued on July 22, Barclays analyst David Anderson reiterated a Sell rating on RIG, with a price target of $6, which represents a potential downside of 45.4% from where the stock is currently trading. Separately, on July 19, Jefferies Co.’s Jason Gammel reiterated a Hold rating on the stock and has a price target of $11.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, David Anderson and Jason Gammel have a total average return of -1.9% and -0.3% respectively. Anderson has a success rate of 43.4% and is ranked #3144 out of 4085 analysts, while Gammel has a success rate of 42.6% and is ranked #2789.
The street is mostly Bearish on RIG stock. Out of 10 analysts who cover the stock, 6 suggest a Sell rating , 3 suggest a Hold and one recommends to Buy the stock. The 12-month average price target assigned to the stock is $8.75, which represents a potential downside of 20.4% from where the stock is currently trading.
Transocean Ltd. provides offshore contract drilling services for oil and gas wells. The company operates through Contract Drilling Services segment. The Contract Drilling Services segment comprises mobile offshore drilling fleet, related equipment and work crews primarily on a day rate basis to drill oil and gas wells. It operates technically demanding regions of the offshore drilling business with a particular focus on deepwater and harsh environment drilling services. The segment consists of floaters, jack-ups and other rigs used in support of offshore drilling activities and offshore support services on a worldwide basis.