Seadrill Offers to Acquire 28.5% Stake in Sevan Drilling

Seadrill Ltd. (SDRL), owner of the world’s second-largest ultra-deepwater fleet, offered to buy 28.5 percent in Sevan Drilling ASA as it targets growth in Brazil. Sevan Drilling shares surged the most since May.

Seadrill, whose largest shareholder is shipping tycoon John Fredriksen, offered to buy 96 million shares for $65.5 million through a group of brokers, Arendal, Norway-based Sevan Drilling said today in a statement. The completion is subject to Pareto Securities AS entering a definitive agreement with SV Unsecured Ltd. to buy the shares.

Rising oil prices have resulted in higher exploration budgets and the need for rigs capable of operating in harsh and deepwater environments such as Brazil and the Arctic. The acquisition of Sevan Drilling, which has two rigs under contract with Petroleo Brasileiro SA, advances plans announced by Seadrill last month to evaluate the creation of a separate Brazil-listed company.

“Growth in deepwater is a big part of our strategy, so fits in very well,” Seadrill Chief Financial Officer Esa Ikaheimonen said by e-mail. “Furthermore, strengthening our play in Brazil is fully aligned.”

The implied value per rig is well below $500 million, making the acquisition good value even if the Petrobras contracts are priced well below the present market, he said.

Drawn-Out Process

Sevan Drilling shares jumped 20 percent to 5.46 kroner in Oslo trading, the biggest intraday gain since May 3. Seadrill advanced 1.1 percent to 201.7 kroner.

“We view this as a complementary acquisition that will add scale and will fit strategically well into Seadrill’s plans of creating a separate Brazilian drilling company,” Robert A. Jensen and Anders Bergland, analysts at RS Platou Markets AS, said in an e-mailed note.

“Based on earlier acquisitions by Seadrill, we expect an acquisition of Sevan Drilling could be a drawn-out process,” the Platou analysts wrote. “It is unlikely that a bid for the company would be offered at a material premium to the initial investment.”

ABG Sundal Collier Norge ASA, Arctic Securities ASA, First Securities AS, ING Bank NV, Pareto and SEB Enskilda AS received and accepted an “all-or-nothing” bid from Seadrill. As part of the deal, SV Unsecured will be released from a “lock-up undertaking” in the shares, and Seadrill will be subject to a similar lock-up.

SV Unsecured on Nov. 30 bought the shares as part of the restructuring of Sevan Marine ASA. (SEVAN)

“We got this information 30 minutes ago and so far we have no comments,” Jon Wilmann, chief financial officer of Sevan Drilling, said by phone today. Calls made to Sevan Drilling’s CEO Scott Kerr’s mobile phone weren’t immediately returned.

To contact the reporter on this story: Meera Bhatia in Oslo at mbhatia2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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