Morning Commentary: Ensco’s 3% exchangeables falter as merger with Atwood announced

By Stephanie N. Rotondo

Seattle, May 30 – Ensco plc’s 3% exchangeable senior notes due 2024 were waning in early Tuesday trading, following the stock lower.

The securities were weighed on by news the London-based offshore oil drilling servicer was acquiring Houston-based Atwood Oceanics Inc. in an all-stock deal valued at about $840 million.

The 3% exchangeable notes – a $750 million deal that priced on Dec. 7 – were seen in an 86 to 86.5 context. The underlying stock (NYSE: ESV) was down 28 cents, or 4.25%, at $6.41.

The convertibles initially came with an initial conversion price of $14.02 a share. At the time, that was a 32.5% initial conversion premium.

Atwood shareholders will receive 1.6 Ensco common shares for each of their shares. The price per share comes to $10.72, a 33% premium over the closing share price on May 26.

The combined company is expected to be valued at $6.9 billion.

The companies are anticipating that the deal will close sometime in the third quarter.

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