Ensco (ESV) Gets Shareholders' Approval For Atwood Merger

 | Oct 06, 2017 04:01AM ET

Oil and natural gas driller Ensco plc (NYSE:ESV) announced that its shareholders have given a green signal to the merger with smaller rival Atwood Oceanics Inc. (NYSE:ATW) .

On May 30, Ensco revealed plans to acquire Atwood in an all-stock deal worth $839 million. Per the agreement, the stockholders of Atwood are expected to receive 1.60 shares of Ensco common stock for each share they hold. With the completion of the deal, the current stockholders of Ensco will own approximately 69% of the combined company, with Atwood shareholders holding the rest.

Ensco, one of the strongest players in the oil drilling sector, will gain access to Atwood's six ultra-deepwater floaters, including four drillships and five high-specification jackups. Owing to the complementary nature of the companies’s products, Ensco will be able to provide a complete range of offshore drilling equipment for the production of oil and gas post merger completion.

Management expects this acquisition to drive Ensco's earnings and cash flow per share through cost synergies of approximately $45 million next year and $60 million in 2019. The combined entity will have a broader customer base, greater exposure to the deepwater drilling business, and a wider array of products.

Headquartered in London, Ensco’s prospects look bright as the company has been able to clinch new orders despite commodity price volatility. This is clearly reflected in its substantial project backlog.

However, the company lost 40% value year to date as compared with its industry’s 32.7% decline.