Report: Seadrill and Transocean Are in Merger Talks

 

Two giants of the offshore drilling industry, Seadrill and Transocean, are quietly engaged in talks on a merger, Bloomberg reports. Seadrill's stock jumped nearly 10 percent on Thursday on news of the potential merger. 

The details of the combination remain private, and no final decision has been reached. Both firms have declined requests for comment. 

A merger would allow the two firms greater heft to compete with Noble Corp., the world's largest offshore drilling company. Noble has grown rapidly through M&A, acquiring both Maersk Drilling and Diamond Offshore during a period of rapid consolidation in the industry. 

Last month, Seadrill CEO Simon Johnson said that his firm was looking for opportunities to buy distressed assets and distressed companies, or to merge with another drilling company. "We haven't seen the end of consolidation," Johnson told an investor conference. At the same gathering, Transocean COO Keelan Adamson said that his firm sees room left for "one big consolidation" in the industry. 

Seadrill underwent two rounds of debt restructuring after the 2014 offshore downturn, and founder John Fredriksen - Norway's wealthiest businessman - lost control of one of his flagship companies. It is now a New York-listed public firm with a smaller head count and fleet size. 

Kuppy Kupperman, manager of hedge fund Praetorian Capital, said in a social media that a Seadrill-Transocean would drive up rates and create more consolidation opportunities. In a smaller market, competitors Valaris and Noble might have more leverage to take over other small players, leaving the international drilling industry with three large companies.