By June 11, 2015 Read More →

Trinidad Drilling, CanElson Drilling merge in $505M deal

Trinidad Drilling deal will create ‘stronger, more diverse’ drilling company

Trinidad Drilling

Trinidad Drilling and CanElson Drilling announced the two companies will merge.  Trinidad Drilling photo.

On Thursday, Trinidad Drilling Ltd. (TSX: TDG) and CanElson Drilling Inc. (TSX: CDI) announced they are merging to create a stronger, more diverse North American drilling company.

CanElson’s President and Chief Executive Officer, Randy Hawkings, said “The combined company will be strongly equipped with high-quality rigs across Western Canada, the top oil-focused basins in the US and strategic international markets, including Mexico and Saudi Arabia”.

The merged business will operate one of the newest and largest fleets of oil and gas drilling rigs in North America with a combined total of 163 gross land drilling rigs, including eight international rigs under Trinidad’s joint venture.

The companies say the merger will provide an expanded customer base and create a stronger operation, board of directors and management team.

The combined companies will further diversify operations into the US domestic and international marketplace.

“The transaction is a compelling strategic fit and offers shareholders, customers, and employees of both companies a significant opportunity, owing to the complementary nature of our respective operations,” said Lyle Whitmarsh, Trinidad’s Chief Executive Officer.

Officials with the two companies told the Canadian Press that the merger is expected to save $10 million a year, however, major job cuts are not expected.

“Both companies have cut a lot of people so that’s certainly not the idea going into this,” said Whitmarsh. “We’re going to have some duplicates that we’re going to have to deal with but for the most part we’ve done a lot of that already.”

Under the terms of the deal, Trinidad will acquire all of the issued and outstanding common shares of CanElson in exchange for cash and Trinidad shares.

CanElson shareholders will, for each share, have the option to receive 1.0631 Trinidad shares or $4.90 in cash, subject to an aggregate maximum $50 million cash payment by Trinidad.

In the event that the CanElson shareholders elect to receive more than the maximum cash consideration, a pro rata adjustment will be made such that the aggregate amount of cash to be paid to the CanElson shareholders will not exceed the maximum cash consideration.

Trinidad says the value of the transaction is approximately $505 million, including the assumption of approximately $36 million in CanElson debt.

The cash portion of the Transaction will be financed from Trinidad’s cash balances and existing bank credit facilities.  Upon completion of the deal, current Trinidad shareholders will own approximately 60% and CanElson shareholders will collectively own approximately 40% of the combined company.

The transaction is expected to be completed before the end of August and is subject to standard TSX, Court and regulatory approvals and other closing conditions.  The Boards of Directors of both companies have unanimously approved the transaction.

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