Seawell to Acquire Allis-Chalmers for $890MM

Seadrill's majority owned subsidiary Seawell and Allis-Chalmers announced a definitive merger agreement providing for the acquisition of Allis-Chalmers by Seawell in a transaction valued at approximately US $890 million (including assumed debt). 

The combined company will have approximately 6,500 employees and is projected by equity research analysts to have an estimated revenues of US $1.3 billion and a contribution to capital or EBITDA of US $195 million in 2010. The combined company will operate its Drilling and Well Services offerings with a global footprint covering more than 30 of the world's key oil and gas regions including the US, Gulf of Mexico, Brazil, Argentina, North Sea, Middle East, Africa and Southeast Asia / Pacific. 

The combined Drilling Services offering will include platform drilling, land contract drilling, modular rigs, maintenance of drilling systems, directional drilling technology, underbalanced drilling, facility engineering services, rig and riser inspections, and oilfield rentals. The company will be able to provide its customers with fully integrated drilling services, both onshore and offshore, with more than 4,000 experienced drilling crew members and senior directional drillers. The Well Services offering will include electric and mechanical wireline services, production logging services, coil tubing services, ultrasonic investigation logging services, down-hole cameras, and advanced well fishing services. The combined company has a long track record of safe and efficient operations in the North Sea, USA and South America. 

Seawell's Executive Chairman, Jorgen Peter Rasmussen, said, "We are very pleased to welcome Allis-Chalmers' employees and management to Seawell. This is a major step in our quest to create a global first-class drilling and well services company focused on assisting our customers in producing more hydrocarbons from their existing fields. We complement each other with a much improved geographical footprint, similar focus on customers and a wider range of technology and services, which we are now able to offer to our combined customer base. We intend to build a unique and leading company in the oilfield service sector." 

Mr. Rasmussen foresees that "the merger will allow the combined company to grow the business and profitability faster than each of the companies on their own. We invite all Allis-Chalmers stakeholders to join the new combined company and participate in an exciting future as the new company will have the ambition to become one of the largest independent well services companies." 

Under the agreement, Allis-Chalmers stockholders will have the right to elect US $4.25 in cash or 1.15 Seawell common shares for each share of Allis-Chalmers common stock, subject to proration if more than 35% of the shares elect to receive cash. Shares of Allis-Chalmers' existing preferred stock will be treated as common stock on an as converted basis. Based on the closing price of the Seawell common shares on the NOTC on August 12, 2010, the implied acquisition price represents a 28% premium to Allis-Chalmers' six month average stock price and a 77% premium over today's closing price. The merger is conditioned, among other things, on the listing of Seawell on the Oslo Børs or the London Stock Exchange and Seawell raising no less than an additional US $100 million in equity. The transaction is intended to be tax-free to stockholders of both companies for U.S. federal income tax purposes and will be accounted for as a purchase. 

Upon completion of the merger, Jørgen Peter Rasmussen (51) will be the combined company's new Chief Executive Officer and President, and a member of the Board of Directors. The new company's Chief Operating Officer and Executive Vice President will be Thorleif Egeli (46) who is currently the Chief Executive Officer of Seawell Management AS. 

Allis-Chalmers' Chairman and Chief Executive Officer Munawar ("Micki") H. Hidayatallah said, "We are excited by the prospects of the combination of these two companies and strongly believe that we will greatly accelerate the execution of Allis-Chalmers' strategic objectives to access and develop new technologies, increase the products and services we offer our customers and expand our global footprint."

The non-executive Chairman of Seawell Limited will be Saad Bargach of Lime Rock Partners and Tor Olav Trøim will continue as Vice-Chairman. Among the other Board members will be Alejandro Bulgheroni, Cecilie Fredriksen, Giovanni Dell' Orto, and John Reynolds of Lime Rock Partners. Hidayatallah will serve as a senior advisor to the new Board. 

Lime Rock Partners V, L.P. (Lime Rock) has entered into an agreement with Seawell pursuant to which Lime Rock has, among other things, agreed that if it votes in favor of the merger, it will elect to receive Seawell common shares in respect of the Allis-Chalmers preferred and common stock that it holds. Pursuant to this agreement, Lime Rock has also agreed to vote its Allis-Chalmers shares against any alternative transaction for a period of nine months following any termination of the merger agreement. 

Saad Bargach, Managing Director of Lime Rock Partners and proposed Chairman of the merged company, said, "Lime Rock is exceptionally enthusiastic about the merger between two great companies like Allis-Chalmers and Seawell. We believe that the combined company's global presence, onshore and offshore expertise, differentiated technology, and exceptional management team will result in an even more effective competitor in the international oilfield service sector."

The merger is subject to the approval of Allis-Chalmers' stockholders as well as HSR approval, and other customary conditions. The companies anticipate that the transaction could close as soon as the end of the calendar year. Seawell and Allis-Chalmers intend to file a proxy statement / prospectus with the U.S. Securities and Exchange Commission as soon as possible. 

Alpha Corporate Finance and Goldman Sachs International are acting as Seawell's financial advisors. Seawell's legal advisors are Skadden, Arps, Slate, Meagher & Flom LLP, and Wiersholm, Mellbye & Bech, advokatfirma AS. Andrews Kurth LLP and Thommessen are legal advisors for Allis-Chalmers. RBC Capital Markets Corporation is acting as Allis-Chalmers' financial advisor and rendered a fairness opinion to its Board of Directors.


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