Pride, Marine Drilling Agree to All-Stock Merger

In a strategic deal that would create the world's third-largest offshore driller, Pride International agreed to buy Marine Drilling Cos. for $1.92 billion in an all-stock deal last Thursday. The new company, to be called Pride International, has already received approval by both boards.

Based upon the closing stock prices last Wednesday, $32.65 for Pride and $27.72 for Marine Drilling, the total enterprise value of the combined company would be approximately $6.2 billion, consisting of $4.5 billion equity and $1.7 billion net debt.

Combined, the offshore fleet would consist of two drillships, 11 semi-submersible rigs, 35 jack-ups and 29 tender-assisted barge or platform rigs. Its land fleet would operate 246 drilling rigs. Six of the rigs are newly constructed and capable of operating in water depths of 5,000 feet or more.

By merging with Marine Drilling, Pride would gain a foothold in shallow water drilling, which analysts say would help with an expected boost in natural gas exploration and production.

"This important merger intensifies each firm's position in the Gulf of Mexico premium jack-up rig and mat-supported jack-up rig contract drilling markets, [and] intensifies their positions in the mid-depth and deepwater semi-submersible rig contract drilling markets," said Robert N. McCreary of Moody's Investor Service. The analyst also placed Pride's ratings under review for an upgrade following the announcement, noting that Marine Drilling was almost debt free.

Just before the merger was announced last week, shares of Houston-based Pride jumped on a rumor that it was about to merge with Nabors Industries or Precision Drilling of Canada. Under terms of the announced merger, shareholders of each company would receive one share in a new Delaware company for each common share of either Pride or Sugar Land, TX-based Marine Drilling. Once the merger closes, Pride shareholders would control 56% of the stock while Marine Drilling shareholders would receive 44%.

Chairman of the new company would be current Marine Drilling Chairman Robert Barbanell. Paul Bragg, CEO and president of Pride, would assume those positions at the new company. Both companies also would each have four board members. Pride's 8,000 employees and Marine Drilling's 1,200 will be headquartered in Houston.

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