Clifford Chance has advised Malaysia’s SapuraKencana Petroleum Bhd on the latter’s agreement to buy the tender rig operations of Norwegian-Bermudan company, Seadrill Ltd, for 8.9 billion ringgit ($2.9 billion), one of the largest M&A deals in Southeast Asia this year.
Reuters reported that Seadrill, the world's biggest offshore rig group by market value and the crown jewel in billionaire John Fredriksen's empire, is selling its tender rigs division - rigs for drilling in waters up to 6,500 feet - to the Malaysian firm, which will get an established business with expertise to help its Asian expansion.
As part of the deal, Seadrill will receive $350 million of new SapuraKencana shares, doubling the Hamilton, Bermuda-headquartered company’s stake to about 13 percent. SapuraKencana will take over 16 operating rigs, and an additional five units currently under construction. The operating rigs are currently contracted under long-term fixed price contracts with companies such as Chevron, Shell, PTTEP and Petronas Carigali.
SapuraKencana, Malaysia’s biggest oil and gas services company was formed this year following the 11.9 billion ringgit merger between Malaysia’s SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd.
Partner Lee Taylor led the Clifford Chance team, and with Abdullah Chan representing SapuraKencana, and Norway’s Wiersholm acting as Seadrill's counsel.
In an interview with ALB, Taylor noted that the deal was significant, not just as a sign that Asian firms are increasingly looking at consolidation strategies as a platform for growth, but also as evidence that Malaysian companies had started looking overseas in a big way. “The recent purchase of Battersea Power Station in the UK by a Malaysian consortium, and now this (and there are plenty of others), point to the fact that Malaysian companies are certainly looking beyond their own shores,” he said.
Taylor said that the deal had been fairly complex for two main reasons. First was the number of jurisdictions involved – Norway, Bermuda, Singapore, Malaysia and New York - as Seadrill's are listed on the NYSE and Oslo Stock Exchange while SapuraKencana's shares are listed on Bursa Malaysia. Secondly, there was also the issue of how the consideration to be paid to Seadrill is to be financed – through a combination of existing cash reserves, debt financing, private placement of new listed SapuraKencana shares to Malaysian-based institutional investors, issuance of new listed SapauraKencana shares to Seadrill, issuance of new convertible redeemable preference shares in SapuraKencana to Seadrill, and a certain portion of deferred consideration.
He added that signing of definitive transaction documents was expected to be carried out by the end of the year, with the deal scheduled to be completed in early 2013.
Ranajit Dam is Southeast Asia Editor at ALB. Follow us on Twitter: @ALB_Magazine.
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