Ensco shareholders to approve Atwood Oceanics acquisition

Ensco shareholders to approve Atwood Oceanics acquisition

Ensco plc said its shareholders have been advised to approve the proposed acquisition of Atwood Oceanics.

The acquisition of Atwood Oceanics was advised by independent proxy advisory firm Glass Lewis, has recommended that Ensco shareholders vote “FOR” the proposed all-stock transaction with Atwood Oceanics, Inc., at the company’s upcoming general meeting of shareholders on 5 October 2017.

In making its recommendations, Glass Lewis noted*:

“…we find that the proposed transaction appears strategically reasonable and, on balance, financially acceptable from the perspective of Ensco and its shareholders.”

“We recognize that the offshore drilling industry would likely benefit from consolidation and that, in this regard, Ensco has taken a proactive approach to reviewing a range of opportunities, including the potential acquisition of assets and larger scale transaction.”

“Strategically, the proposed transaction would create a larger offshore drilling company with a broader portfolio of assets and greater scale. Atwood and Ensco currently have limited customer overlap and the combined company would have a broader and more diversified customer base as well as a diversified geographic profile.”

“The combined company is expected to benefit from approximately $65 million of pre-tax annual cost savings, a majority of which are expected to be achieved in 2018, with the full amount expected to be realized on a run-rate basis by 2019.”
“Moreover, the combined company would have a strong balance sheet and a reasonable leverage profile, in our view, with a pro forma net debt to capitalization ratio of 29% as at March 31, 2017.”

“Overall, we see no cause for significant shareholder concern with the strategic rationale of the proposed transaction, which will combine the complementary operations and assets of Atwood and Ensco, providing greater scale and opportunities to achieve meaningful synergies, in our view.”

Carl Trowell, Ensco President and Chief Executive Officer, stated: “We are pleased that Glass Lewis recognizes the compelling strategic and financial merits of Ensco’s acquisition of Atwood and has urged shareholders to support this combination. We believe the offshore drilling sector is entering a recovery phase following an extended downturn and that now is the time to make counter-cyclical investments in the highest-specification assets to generate long-term shareholder value. We are already seeing asset pricing for these rigs begin to inflect and, going forward, we believe the pricing of these assets will increase sharply given the limited number of these rigs in the global supply as well as fierce competition from other drillers looking to purchase highest-quality assets at all-time cyclical lows.”

“By adding Atwood now, at a key juncture in the market cycle, we are acquiring high-quality assets at a compelling price reflecting cyclical lows, furthering our ability to meet increasing customer demand and strengthening our competitive position, which coupled with significant expected synergies, will generate meaningful, long-term value for our shareholders. With Atwood, we will become a larger company, with a higher-quality rig fleet, which will greatly improve our access to liquidity and provides us with additional financial flexibility at a pivotal point in the market recovery. As we move through the next stage of the market cycle, we will continue to make disciplined capital deployment decisions that preserve our financial strength and flexibility and best position Ensco in the offshore recovery.”

“Since announcing the merger, Ensco has engaged with many shareholders and we are pleased with the support we have received for the transaction and the recognition of the significant value this acquisition will create. We look forward to the general meeting of shareholders on 5 October as we work towards completing the transaction and fully realizing the benefits that Atwood brings to the combined company.”

Ensco notes that the acquisition of Atwood will create a financially strong global offshore drilling leader with a wide range of fleet capabilities, a diverse client base and a global footprint spanning six continents with operations in nearly every major deep- and shallow-water basin.

Ongoing prudent financial management and capital deployment by Ensco leadership and the Board of Directors, who have a history of making sound strategic capital decisions to best position the Company through various stages of the market cycle.

Ensco’s targeted investments in technology and innovation that improve the Company’s processes, systems and intellectual property, giving Ensco a competitive advantage in the offshore recovery.
Ensco’s continuous drive toward industry-leading safety and operational excellence, which position the Company well to continue delivering high levels of performance to customers.

The enhancement of Ensco’s fleet with the addition of Atwood’s best-in-class assets at attractive, below-market values, which further Ensco’s ability to meet increasing customer demand for high-specification assets.
Significant shareholder value creation opportunities from the acquisition, which is expected to generate double-digit accretion for Ensco shareholders and total synergies that create more than $500 million of present value at a 10% discount rate.

A strong pro forma balance sheet with financial flexibility and sufficient liquidity to cover debt maturities through 2024.
A disciplined approach to the acquisition by Ensco’s management and Board of Directors, who participated in a competitive process, with the premium at the time of the offer less than 10% higher than the market value of the competing bid.
The Company also acknowledged the report recently issued by proxy advisory firm Institutional Shareholder Services (“ISS”) regarding the proposed all-stock transaction with Atwood. The company firmly believes that ISS reached the wrong conclusion in failing to recommend that shareholders vote “FOR” the transaction. Even ISS, in its report, recognized the logic of the combination, noting*:

“…the transaction is a model opportunity (what could perhaps be called ‘opportunistically strategic’) that achieves two ends at once—a deep value bet with limited downside and an embedded option on full market recovery, plus a strategic fit that defends and/or extends Ensco’s competitive position.”
“The quality of the Atwood assets is indeed recognized across the industry. Not only that, their strategic fit with Ensco’s current fleet is also apparent, as both companies have blended fleets of moderate depth jackups and highspec, ultra-deepwater drillships.”

“Ensco is presenting a deal during the most severe downturn in the industry in the last several decades. From that perspective, the timing of the transaction seems appropriate.”

Ensco notes that the ISS report highlights the potential market conditions surrounding the transaction and cites the proposed acquisition of Atwood as a “model opportunity”. However, ISS appears to have disregarded both Ensco and third-party views on the market outlook and the competitive dynamics moving forward. Instead, ISS has substituted its subjective judgment for rigorous assessment of the market by Ensco’s Board of Directors and management, while failing to include and inconsistently applying information throughout their analysis. Ensco has consistently cited the increasing consolidation within the industry; stabilizing breakeven levels on offshore projects; increasing confidence from major oil companies towards their offshore projects and improving utilization rates for the global rig fleet. These points have also all been echoed by Ensco’s offshore drilling peers in recent months as well as by Glass Lewis. Ensco believes investors will independently evaluate quantifiable factors related to market activity.

Ensco’s Board of Directors unanimously recommends that Ensco shareholders vote “FOR” the proposal to combine with Atwood in an all-stock transaction at the upcoming general meeting of shareholders, which is necessary to complete the acquisition.

Ensco’s general meeting of shareholders is scheduled to take place on 5 October 2017 at 3:00 p.m. (London time) at the offices of Slaughter and May, One Bunhill Row, London EC1Y 8YY, England. All shareholders of record of Ensco’s common stock as of the close of business on 23 August 2017 will be entitled to vote their shares either in person or by proxy at the shareholder meeting.

Atwood’s 2017 special meeting of shareholders is scheduled for 5 October 2017.

As previously announced on 30 May 2017, Ensco and Atwood have entered into a definitive merger agreement under which Ensco will acquire Atwood in an all-stock transaction that was unanimously approved by each company’s board of directors. Under the terms of the merger agreement, Atwood shareholders will receive 1.60 shares of Ensco for each share of Atwood common stock for a total value of $10.72 per Atwood share based on Ensco’s closing share price of $6.70 on 26 May 2017. Upon close of the transaction, Ensco and Atwood shareholders will own approximately 69% and 31%, respectively, of the outstanding shares of Ensco plc. There are no financing conditions for this transaction. On 29 June 2017, Ensco and Atwood announced early termination of the waiting period under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976. The company anticipates closing the transaction in the first week of October 2017.

Shareholders who have questions about the merger and/or the process to submit proxies or voting instructions may contact Ensco’s proxy solicitors, D.F. King at +1 (888) 626-0988 or MacKenzie Partners at +1 (800) 322-2885, or Atwood’s proxy solicitor, Innisfree M&A Incorporated at +1 (888) 750-5834. Banks and Brokers may call collect at +1 (212) 269-5550 or +1 (212) 929-5500 for Ensco or +1 (212) 750-5833 for Atwood. Copies of the proxy statement/prospectus and/or proxy card may be obtained from the respective proxy solicitors.

Shareholders of both companies are encouraged to read the proxy materials in their entirety as they provide, among other information, a discussion of the reasons behind the recommendation of each company’s