Saipem has signed a binding agreement with KCA Deutag (KCAD) to sell the entirety of its Drilling Onshore operations in exchange for a cash consideration of $550mn plus 10% stake in KCAD after its acquisition of the Saipem’s Drilling Onshore.
Saipem noted that the transaction does not entail any financial debt transfer to KCAD, adding that the cash proceeds from the transaction will improve its liquidity, lower its net debt and support the delivery of its 2022-25 business plan.
Moreover, the transaction is a further step toward a more focused and resilient business model based on the growing trends of its reference markets, concentrating efforts in the Drilling Offshore while supporting the achievement of its capital structure and liquidity objectives.
The addition of Saipem’s Drilling Onshore activities to KCAD, which is already among the most reputable international drilling operators, will bring additional opportunities for value creation from operational synergies and the inclusion of its expertise, from which the firm, in turn, expects to benefit via its minority stake in the enhanced entity.
Saipem operates its Drilling Onshore business globally outside Italy, with a focus in the Middle East and Americas, in 13 countries with around 4,000 people and with a portfolio of 83 proprietary land rigs.
Saipem’s Drilling Onshore business posted full-year 2021 revenues of $371mn and an adjusted EBITDA of $87mn. Adjusted EBITDA of Drilling Onshore is expected to represent around 20% of the full year 2022 consolidated adjusted EBITDA of Saipem, the firm noted.
KCAD is a leading drilling, engineering and technology company working onshore and offshore. It operates approximately 110 drilling rigs in 20 countries, employing 8,300 people. In full-year 2021 KCAD posted consolidated revenues of $1,196mn and adjusted EBITDA of $237mn. Consolidated net debt at year-end 2021 was $396mn.
KCAD – Saipem’s combined Group can improve market participation
KCAD noted that upon completion of the acquisition, the combined Group will manage a leading global onshore drilling business generating over 50% of its EBITDA from the Middle East with more than 11,000 employees globally. Total backlog will increase by $1.6bn to $7.2bn.
Strategic highlights of the combined Group:
- The acquisition will create a leading global onshore drilling business with over $1.6bn in revenue across core geographies in the Middle East and key markets in Europe and Latin America.
- $7.2bn backlog will provide greater revenue visibility across global markets.
- Blue chip customer base with high share of national oil companies generating around 50% of the Group revenue.
- Improved market participation across geographies with much lower lifting costs.
- Confidence in generating around $24mn in cost synergies from overhead and operational efficiencies based on track record with previous Dalma acquisition.
Joseph Elkhoury, CEO of KCA Deutag said:Â “This milestone acquisition of Saipem Onshore Drilling allows us to significantly upgrade our business by expanding in core geographies in the Middle East and key markets in Europe and Latin America. We have continued to transform our business to #enhancethebrand and create accretive value for all our stakeholders: employees, customers, investors and the communities where we live and work.”
Closing of the transaction is subject to the completion of capital increase and customary conditions and approvals, Saipen stated. adding that final consideration is subject to customary closing adjustments.
Saipem is being advised by JP Morgan and Lazard in the context of this transaction, while Barclays and Houlihan Lokey acted as financial and debt advisors respectively, to KCAD.
Given the nature of the transaction, closing for the Middle East and other markets is expected in Q4 2022 with Latin America to follow at the completion of its carve-out. $50mn of the cash consideration will be withheld pending completion of the Latin America closing, KCAD noted.
