Borr Drilling has signed a binding tender agreement to buy all the outstanding shares in Paragon Offshore. The total acquisition price for all outstanding shares is estimated at $232.5m. Borr has received commitments from holders of 67.9% of Paragon’s shares for its tender offer so far.
Paragon has approximately $180m of cash and approximately $215m of liabilities linked to debt and working capital. Paragon had as of January 31, 2018 a revenue backlog of $204m.
The acquisition will be financed through cash on balance sheet and issuance of equity and/or debt instruments. Borr currently has authorisation to issue 46.7m shares within its current mandate.
Paragon has 32 drilling units including two modern units of the JU-2000E design, the Prospector 1 and Prospector 5 built in 2013 and 2014 currently located in the North Sea.
“These rigs in particular will complement Borr’s fleet and further consolidate its leading position in the premium jack-up segment. Additionally, it provides a solid base for growth in the recovering North Sea rig market,” Borr said in a release today.
The portfolio also includes a semisubmersible MSS1 scheduled to go on a long-term contract for TAQA in the North Sea starting in March. The Prospector 1 and five of Paragon’s older jack-ups are currently working in the North Sea, India and Middle East, with four additional jack-ups under contract or committed, including Prospector 5. In addition, there are 21 older uncontracted jack-ups stacked in different locations.
“We are acquiring an experienced organisation, solid management systems, and quality assets at attractive prices. By integrating a very capable operating platform, Borr will be qualified based on the historical track record to tender, win contracts and operate in most jurisdictions”, commented CEO Simon Johnson.
“As almost 50% of the global rig fleet is more than 30 years old, responsible owners should take steps to rationalise their fleets and consolidate the fragmented market. Borr wants to be at the forefront of this initiative. Borr will, as communicated, focus on operating modern, high-spec assets. In view of this strategy the board will evaluate the future of the uncontracted older jack-ups which are part of the Paragon fleet. Based on the anticipated high reactivation cost, safety standards and drilling efficiency it is likely that most of these units will not be marketed for new drilling contracts,” Borr chairman Tor Olav Troim said.
Borr will, following completion of the transaction, own 24 premium jack-ups built after 2000, and become the world’s largest premium jack-up rig operator.
“With the increased activity we are currently witnessing, the assets and operation acquired through this transaction are likely to create significant shareholder value,” the Borr release concluded.