«Monsters’ come
« Threats to the dominance of foreign monsters [in the Russian oilfield services market] is not “- said a few years ago in an interview with “Vedomosti” founder and CEO of EDC Alexander Japaridze. But now he is selling his company to one of the “monsters” – amerikanckoy Schlumberger. On Tuesday, the company announced an agreement, under which in 2018 Schlumberger will become the sole owner of EDC.
The first part of the deal, which resulted in Schlumberger will receive 45.65% of shares of EDC, is scheduled to close in I quarter of 2015 year. The structure of the deal suggests that the major shareholders and management of EDC redeemed receipts (GDR) of the contractor in his minority shareholders through a specially created one of the shareholders of the company EDC Acquisition Sompany Limited. This company Schlumberger will provide a loan of $ 991 million. After delisting the loan will be converted into shares of EDC Acquisition Limited (about 30%). Then Americans buy another 14.98% stake in EDC current shareholders of the company (in proportion to their shares) and will bring its stake to 45.65%. In both cases, Schlumberger will pay $ 22 for each receipt. This price is 81.1% above the closing price on January 19, and 7% – the average value of the shares of the drilling company for the last six months.
Another 54.35% of the shares will remain until at management and major shareholders of EDC. According to the company as at 31 December 2013, Japaridze owned 30.2% stake in the company, 22.4% still had Alexander Putilov, who in the late 1990s led “Rosneft”. Schlumberger will have an option to buy a controlling stake, but realize it is not a US company can before I quarter of 2018, option life – two years. At what price Schlumberger can redeem this package – not disclosed. But for the right to use an optional Americans now pay principal shareholders EDC $ 176 million. Another $ 44 million will pay Schlumbeger number of co-owners of EDC for what they would make a commitment for several years did not work for competitors.
In this way, a total amount of the transaction for the purchase of 45.65% stake in EDC (taking into account the payment for the provision of an option) will be about $ 1, 7 billion. And the whole company is valued for the transaction of $ 3.2 billion.
EGM EDC, which must be approved a plan to sell the company and delisting, scheduled for February 16. For approval of the transaction must collect a minimum of two-thirds majority. But the owners of 69.33% already agreed to support it, the message says EDC. Among the risks that may affect the transaction, – adverse effects that may occur with the financial performance of EDC, or the imposition of sanctions against the company or its shareholders.
«Timely deal”
Investors message about the deal happy: EDC shares on the London Stock Exchange on Tuesday rose by 75% and came close to the redemption price of $ 22. The company’s capitalization was $ 2.97 billion. Minoratarii should be happy with the proposed conditions, says a source in the EDC: recent quotation of the company due to a sharp drop in oil prices, the overall situation in Russia and the lack of liquidity did not reflect the real value of the company. A year ago, in January 2014, depositary receipts on the London Stock Exchange EDC cost almost twice as much as that is now offering Schlumberger – then their price was $ 42.5 per share.
Last year was difficult for EDC . In the I half fell from the contractor all the key figures: revenues decreased by 8.5% to $ 1.55 billion, EBITDA by 9% to $ 402 million and net profit by 7.2% to $ 201 million. It happened at the background significant drop in orders from the EDC “Rosneft”, which in the fight against costs decided to take ownership consolidation oilfield service assets. The volume of drilling EDC for state-owned companies declined by a total of 58%. Presenting the results of I half-year in late August, EDC treasurer Richard Anderson also warned investors that the EU and US sanctions that prohibit the delivery of Russian equipment for arctic, deepwater and shale oil projects may in the future lead to a reduction in the rate of growth of our business.
How EDC was fixed in the Russian oilfield services market
Eurasia Drilling Company Limited (EDC) – the largest player in the Russian oilfield services market. Founded in 2002 by a group of Russian and foreign investors in the Cayman Islands. The main shareholder and CEO – Alexander Japaridze (owns 30,2%).
2004
EDC entered the Russian market onshore drilling, bought for $ 130 million 100% oilfield services division LUKOIL “LUKOIL-Drilling”, which was renamed to LLC “Drilling Company” Eurasia ».
2006
In December EDC bought for $ 40 million 100-percent share in “LUKOIL Shelf Limited” and “LUKOIL Overseas Orient Limited” – operators jack-up rig “Astra”, which were then renamed to LLC “Drilling Company” Eurasia Shelf “. In May 2007, “BKE Shelf” has become a 100 percent subsidiary EDC, providing services in the field of offshore drilling.
2007
The company held an IPO on the London Stock Exchange. Its market capitalization was $ 3.4 billion. At that time owned 45.84% Japaridze company. During the IPO EDC raised $ 450 million, its shareholders – $ 269.5 million.
2011
In May Japaridze transferred the shares of EDC in Hadar Fund, which has angered investors and led to a drop in the value of receipts for shares in the company in August by 33%. Later, as he wrote the magazine Forbes, it became clear that Hadar Fund was controlled by major shareholders of LUKOIL and EDC – Japaridze, Alekperov and Leonid Fedun. In the media reported that Japaridze transferred shares of EDC in Hadar Fund on behalf of Alekperov. In October 2011, the head of the firm LUKOIL has an option on 22% of the shares, but does not execute it, and in April 2013 Japaridze returned from the fund just about anything made there.
2014
In the first half of EDC showed drop in net profit (minus 7.2% compared to January-June of last year) , revenue (minus 8,5%), EBITDA (minus 9%) and profitability EBITDA (min 0.1 percentage points) on the decline orders “Rosneft” for drilling services. Compared with the first half of last year in the first half of 2014 the share of “Rosneft” dropped from 24 to 11%. In addition, the management of EDC predicted that due to sectoral EU sanctions and the US in the future may reduce the rate of growth of the company’s business.
But do not confuse Schlumberger sanctions. “We conducted a thorough analysis of the current sanctions and do not expect that this transaction would be contrary to the current sanctions regime, since the EDC is working on the sea shallows and in the market of traditional onshore drilling, “- said yesterday vice president of Schlumberger Alexander Borisov . Technology Integration of the two companies, according to him, will allow to provide services at the well site “the level of which will be a unique and breakthrough in the current market».
«Every capitalist thinking about how to monetize their capital. The deal to sell EDC Schlumberger looks timely, “- says CEO of the oilfield services holding” Targin “Zakirov. According to him, in an environment where oil and gas companies in Russia and around the world become larger, the consolidation of the OFS is logical. The company becomes more convenient to work with a major contractor who will be able to meet the requirements of projects on science, technology and investment, says Zakirov, citing the example of the recent merger Halliburton and Baker Hughes.
On the basis of the consensus forecast the next 12 months, EDC evaluated for the transaction 4,5 EBITDA, said a senior analyst at UBS Konstantin Cherepanov. Now the company is in a difficult situation due to the weakening of the ruble (revenue in rubles) and low oil prices, and after the break in relations with EDC “Rosneft” company’s position in the market faltered, he notes, so that in the current environment offer Sclumberger looks attractive . And for Americans interested in this deal from a global perspective: Russia – the largest oil and gas producer that provides a stable demand for drilling, which is not in America, concludes Cherepanov.
In Japaridze has been successful experience Cooperation with Schlumberger. In 2003, the top manager has agreed to sell to Americans of “Petro-Alliance”, which provides orders LUKOIL (the amount of the transaction for a total of $ 165 million and 4.7 million shares of Schlumberger). And in 2004 he created the EDC purchased from LUKOIL oil service unit “Lukoil-drilling” for $ 130 million. In 2007, EDC conducted an IPO, during which the company valued at $ 3.4 billion. The amount of the new deal with the American corporation is close to the this evaluation. Package businessman to deal estimated at nearly $ 1 billion.
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