DryShips Acquires the Remainder of Its Drilling Rig Unit
DryShips Inc. has entered into an agreement to acquire the remaining 25% of the total issued and outstanding capital stock of Primelead Shareholders Inc. ("Primelead"). Upon closing of this transaction, Primelead will become a wholly owned subsidiary of the Company.
Primelead's principal assets include two owned and operational ultra deepwater semisubmersible drilling rigs, the Eirik Raude and the Leiv Eiriksson, and four newbuilding drillship contracts for Hulls 1837, 1838, 1865 and 1866. Upon delivery of the newbuilding drillships, Primelead will possess one of the youngest and most sophisticated fleets of ultra deepwater drilling rigs and drillships in the industry. The newbuilding drillships have contractual delivery dates commencing in the fourth quarter of 2010 and ending in the third quarter of 2011. In addition to its drilling rig assets, Primelead owns Ocean Rig ASA which manages the commercial, operational and technical aspects of the six drilling rig assets.
The consideration to be paid for the 25% interest in Primelead consists of a one-time $50.0 million cash payment on closing of the transaction, and the issuance of $280.0 million face value of convertible preferred stock ("Preferred Stock"). The Preferred Stock, which carries normal voting rights, will mandatorily convert into common shares of DryShips at a 27.5% premium to the established DryShips common share price of $5.36 per share. The Preferred Stock will mandatorily convert into common shares of DryShips in four equal increments that correspond to the contractual delivery of the four newbuilding drillships. The Preferred Stock bears a 6.75% per annum cumulative dividend payable in additional shares of Preferred Stock. The Preferred Stock can also be converted at any time by the holders at 42.9% premium to the established DryShips common share price of the $5.36 per share. The Sellers consist of a company controlled by DryShips' Chairman and Chief Executive Officer, George Economou, and other clients of Cardiff Marine Inc.
The transaction was negotiated and approved by the Audit Committee, which is comprised of DryShips' Independent Directors, acting as a Special Committee. The Audit Committee took the appropriate steps necessary to evaluate the transaction and determine its fairness. Evercore Partners acted as advisor to the Sellers.
Evangelos Mytilinaios, Chairman of the independent Audit Committee of DryShips, commented, "We are pleased to have signed the agreement to acquire the remaining 25% of Primelead. We continue to monitor the strengthening fundamentals of the ultra deepwater offshore drilling market and believe that the future prospects of this business are very bright. With Primelead as a wholly owned subsidiary, DryShips will now fully benefit from the expected free cash flows of our drilling rig unit which is operated by the experienced Ocean Rig management team comprised of seasoned industry executives with proven operational track records.
"In addition, with a majority of the consideration payable in mandatorily convertible Preferred Stock matching the contractual delivery dates of the four newbuilding drillships, the transaction aligns the interest of all the shareholders and is accretive to earnings. We are also pleased that our Chairman and CEO continues to show his long-term commitment to DryShips, maintaining his standing as DryShips' principal common shareholder. Finally, we believe this acquisition will provide DryShips more flexibility in the financing and employment of its offshore drilling units."
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