Noble Corp. (NE) said it has been evaluating creating a master-limited partnership as an activist shareholder revealed it’s in discussions with the drilling rig owner on how to boost “undervalued” shares.
Fir Tree Inc., founded by Jeffrey Tannenbaum, last week met with Noble’s lead director about several strategic alternatives, including the creation of a tax-advantaged partnership, the New York-based hedge fund said in a filing today. The fund, which owns a 9.6 percent stake, also discussed London-based Noble’s dividend, share buybacks and board compensation and composition.
Offshore rig contractors have been studying tax-free partnerships for some of their vessels since Seadrill Ltd. (SDRL) adopted such a structure in 2012. Transocean Ltd., the world’s largest rig contractor, created a partnership this year named Transocean Partners LLC. (RIGP) Last month, Noble put about half of its rig fleet into Paragon Offshore Plc, a new publicly traded company, not a partnership.
“The board’s going to have to answer some tough questions about stock-price performance, what’s happened with the spin and give some clarity to what their capital budgeting strategy is,” said Darren Gacicia, an analyst at Guggenheim Securities in New York who rates the shares a buy and owns none.
Noble, which has fallen 15 percent this year, declined to comment. The stock gained 1.4 percent to $27.85 at the close in New York.
Fir Tree plans to continue its discussion with Noble’s management and the board, as well as other shareholders, and “may take other steps” to help boost value, according to the filing. The company is scheduled to hold an investor lunch tomorrow in New York.
Chairman and Chief Executive Officer David Williams said today that Noble has been looking at forming a tax-advantaged partnership for some time. Master-limited partnerships don’t pay federal income tax.
“We clearly have some assets that would fit that model if that model is a good long-term model for this industry,” Williams told analysts today at the Barclays Plc conference in New York, without mentioning Fir Tree. “That’s the big question.”
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