Ensco’s 3% exchangeables falter as merger with Atwood announced; Becton mandatories better

By Stephanie N. Rotondo

Seattle, May 30 – Ensco plc’s 3% exchangeable senior notes due 2024 were waning in 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 $863 million.

The 3% exchangeable notes – a $750 million deal that priced on Dec. 7 – closed in an 85 to 85.5 range, according to a market source. Earlier in the day, the paper was seen in an 86 to 86.5 context.

The underlying stock dropped 34 cents, or 5.07%, to $6.36.

The convertibles initially came with an initial conversion price of $14.02 a share. At the time, that equaled 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 Atwood’s closing share price on May 26.

The combined company is expected to be valued at $6.9 billion. The combination will result not only in the world’s largest rig fleet, but is also expected to generate $45 million of cost synergies in 2019 and $65 million more savings come 2019.

It is also expected that the merger with be accretive on a discounted cash-flow basis.

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

Additionally, the deal could have wider implications, according to Kurt Hallead of RBC Capital Markets.

In a note out Tuesday, the analyst said that as the oil industry starts to stabilize following the decline in crude prices, other oilfield services providers might take advantage.

“We should keep an eye out for possible future combinations,” he said in his report.

Meanwhile, Becton, Dickinson & Co.’s $2.48 billion of 6.125% series A mandatory convertible preferreds (NYSE: BDXA) remained front and center, as mandatory convertible issues have come back in vogue of late.

For its part, the Becton deal has generated a lot of buzz, given its usually large size.

At Tuesday’s close, the preferreds were at $53.00, a gain of 40 cents.

About 1.25 million of the shares traded during the session.

As for the company’s common stock, it was up $1.59 at $188.07.

The convertible deal came May 11 with an initial conversion premium of 20%.

Citigroup Global Markets Inc., J.P Morgan Securities LLC, Morgan Stanley & Co. LLC, MUFG, BNP Paribas Securities Corp., Barclays and Wells Fargo Securities LLC were the bookrunners.

Mentioned in this article:

Becton, Dickinson & Co. NYSE: BDX

Ensco plc NYSE: ESV

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