(Bloomberg) – Noble Corp., the world’s biggest offshore oil-rig contractor by market value, agreed to buy its smaller competitor Diamond Offshore Drilling Inc. in a deal valued at $1.6 billion.
Diamond stockholders will receive 0.2316 share of Noble plus $5.65 for each share they own, an 11.4% premium based on the June 7 closing price, according to a statement Monday. When the deal closes, Diamond shareholders will own about 14.5% of Noble’s outstanding shares.
The deal comes as offshore drilling is poised to boom in the years ahead as growth in U.S. shale basins ebbs. Noble shares rose 1.5% at 9:30 a.m. New York. Diamond, based in Houston, rose 10%.
Buying Diamond fits Noble’s strategy of going after the biggest offshore oil contractors around the world with some of the newest deepwater rigs. The combined company will boast the biggest selection of latest-model drillships that carry a pair of so-called blowout preventers, a key safety item for drilling in water more than two miles deep.
The offshore industry, particularly in deepwater, is expected to thrive in the coming years as the shale industry matures and oil producers look for new sources of supply. SLB, the world’s biggest oil-services provider, has said it sees the potential for more than $100 billion in final investment decisions for global offshore projects both this year and next.
Noble, based in Sugar Land, Texas, will fund the cash portion of the deal through a $600 million bridge loan. The company plans to expand its board to include one member from Diamond.
Noble also said its board approved a 25% increase in its quarterly dividend to $0.50 per share, starting in the third quarter.
Morgan Stanley & Co. was Noble’s lead financial adviser, and Paul, Weiss, Rifkind, Wharton & Garrison LLP was its legal adviser. Guggenheim Securities LLC and TPH&Co. were financial advisers to Diamond, while Kirkland & Ellis LLP was its legal adviser.
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