Transocean, GlobalSantaFe to merge

24 July 2007

Transocean Inc., the world''s largest offshore driller, and GlobalSantaFe Corp. are to merge and create a $53 billion company.

Under the terms of the deal, Transocean shareholders will receive $33.03 in cash and 0.6996 shares of the combined company for each share of Transocean they own. GlobalSantaFe shareholders will receive $22.46 in cash and 0.4757 shares of the combined company for each share of GlobalSantaFe they own.

The planned $18 billion combination of Transocean Inc. and GlobalSantaFe Corp., could be an indicator to upcoming consolidation in the oil services sector where shortage of deepwater rigs has sent drillers'' profits skyrocketing.

Soaring crude-oil prices have triggered a virtual stampede for the last remaining reserves, many of which are far from the shoreline, on the bottom of the deep ocean floor. That is the main demand driver for deepwater rigs, and a bonanza for companies like Transocean, which operates the world''s largest deepwater-drilling fleet.

Reports suggest that some contractors have been able to secure leases for their units for over $500,000 a day, sending companies'' stock prices spiraling upwards.

Deals in this sector have been speculated as imminent for some time now. On the back of growing earnings, share prices soared, making most potential acquisitions too expensive. About a year ago, Seadrill Ltd., a Bermuda-based drilling contractor held tie-up talks with three U.S. drillers -- Noble Corp., Ensco International Inc. and GlobalSantaFe -- but walked away when valuations grew too high.