Ensign Energy Services Inc. said Aug. 13 it plans to buy Trinidad Drilling Ltd. in a deal valued at C$947 million (US$720.26 million) including debt.
Ensign’s planned takeover offer includes the acquisition of all issued and outstanding Trinidad shares for $1.68 in cash per share plus the assumption of $477 million in outstanding net debt. The offer represents a premium of 11.3% to the company’s close on Aug. 10.
Analysts with Tudor, Picking, Holt & Co. (TPH) said the proposed deal would create one of the largest North American land drillers with critical mass in many key international markets.
"Each company currently has roughly about 40 rigs active in the U.S., so the combined company would quickly become one of the top U.S. land rig contractors," TPH analysts said in a research note on Aug. 13.
Headquartered in Calgary, Albert, Trinidad provides contract drilling and related services in the U.S., Canada, the Middle East and Mexico. The company launched a strategic review in an effort to enhance shareholder value earlier this year but decided to conclude the review process on Aug. 1.
Ensign, which currently owns a 9.8% stake in Trinidad, said it approached Trinidad’s board of directors following the company’s unsuccessful review with a proposal to enter into negotiations regarding a fully-funded all-cash transaction that Ensign expects will "provide Trinidad shareholders the opportunity to realize an immediate premium and liquidity for the Trinidad common shares at a compelling value."
"Following our approach to the Trinidad board, the Trinidad board offered to engage in discussions with us, however these discussions were to be subject to the terms of a confidentiality agreement which contained a lengthy standstill provision," Ensign said in its press release.
"The Trinidad board’s failure to fully engage with Ensign has led us to bring the Offer directly to you, the shareholders and true owners of the company," Ensign continued. "However, unless the Trinidad board agrees to shorten the bid period to as little as 35 days, the offer must remain open for at least 105 days."
Ensign is an oilfield services company, headquartered out of Calgary and operating in Canada, the U.S. and internationally. The company has retained BMO Capital Markets as its exclusive financial adviser, Osler, Hoskin & Harcourt LLP as its legal counsel, and Kingsdale Advisors as its strategic communications adviser, information agent and depositary. (US$1 = C$1.3148)
Editor's note: Reuters contributed to this report.