- Offer follows collapse of deal with U.S. company two weeks ago
- Delisting could help driller to weather `difficult' oil market
Eurasia Drilling Co. received a buyout offer from management and shareholders at less than half the price bid by Schlumberger Ltd. in January. The stock tumbled.
Eurasia investors, whom the company didn’t name, offered $10 a share and proposed to delist the stock from London in response to “difficult market conditions,” according to a statement on Thursday. The board has formed a panel of non-executive independent directors to negotiate a deal.
Schlumberger decided two weeks ago not to pursue its $22-a-share proposal to buy a minority stake in Eurasia after Russian authorities delayed approval of the deal for almost eight months. Eurasia, the country’s largest oil driller, needs funds after its share of the local market shrank amid a crude-price slump that prompted its key client, Lukoil PJSC, to scale back exploration.
The company’s shares dropped as much as 9.3 percent Thursday, the biggest decline this month. They traded down 8.7 percent at $10 -- matching the offer price -- as of 1:29 p.m. in London. The stock has retreated 44 percent this year, valuing the company at $1.5 billion.
“We plan to reject this offer,” Vladimir Vedeneev, chief investment officer of
Raiffeisen Asset Management in Moscow, said by e-mail, without disclosing the size of the bank’s stake. “It is a really low valuation for the business.”
Otkritie Financial Corp. also recommended that minority holders snub the proposal, saying a buyout at $10 “would be a pretty good deal for the management and core shareholders.” Otkritie has a price estimate of $17 a share on Eurasia, compared with the average $15.85 from eight analysts surveyed by Bloomberg.
Eurasia’s “special committee” of independent directors will negotiate terms on behalf of the board with the assistance of adviser Renaissance Capital, whose research unit has a $17 price estimate on the company. Xenon Capital Partners will advise the buyout group, according to the statement.
Eurasia has idled 20 percent of its drilling fleet, most of which was deployed at West Siberian fields, and reduced its workforce by 9.4 percent amid a slowdown in exploration. The investors bidding for the company want to take it private because the business requires “maximum flexibility” as lower crude prices and “geopolitical risks” put pressure on its operations, according to the filing.
A number of Russian companies including potash producer Uralkali PJSC have sought to delist from London after the Kremlin urged businesses to quit overseas stock markets as relations with the U.S. and Europe soured over its incursions in eastern Ukraine.
Schlumberger said Sept. 24 it wouldn’t pursue its $1.7 billion agreement to buy a stake in Eurasia.
Under the initial phase of the deal agreed on in January, Eurasia founder Alexander Djaparidze and other core investors planned to buy out minority holders for $22 a share, an 81 percent premium to the stock price at the time. The Djaparidze-led group would then have sold that 46.45 percent stake to Schlumberger, which would have later gained an option to acquire the rest.
Russia’s Federal Security Service had held up the deal on concerns that Schlumberger, based in Houston, would have had too much influence in Russia’s oil-services market.