Transocean has signed an agreement to acquire offshore-drilling contractor Ocean Rig in a combined cash-and-stock deal worth around $2.7bn, which includes Ocean Rig’s net debt.

If the proposed deal materialises, it will strengthen Transocean’s ultra-deepwater and harsh-environment drilling capabilities.

For each share of Ocean Rig’s common stock, its shareholders will be entitled to receive 1.6128 newly issued shares of Transocean as well as $12.75 in cash, for a total value of $32.28 per Ocean Rig share as per the closing price of 31 August.

Transocean plans to fund the cash portion of the deal through a combination of cash on hand and financing drawn from Citi.

Once the merger is completed, shareholders of Transocean and Ocean Rig will own 79% and 21% of the combined company, respectively.

“This combination with Ocean Rig further strengthens our relationships with strategic customers, while expanding our presence in the key markets of Brazil, West Africa and Norway.”

Ocean Rig’s fleet includes nine ultra-deepwater drillships and two harsh environment semi-submersibles. Its fleet also includes two ultra-deepwater drillships that are being constructed at Samsung Heavy Industries. These two under-construction drillships are expected to be respectively delivered in the third quarter of 2019 and the third quarter of 2020.

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Transocean president and CEO Jeremy Thigpen said: “The proposed acquisition of Ocean Rig provides us with a unique opportunity to continue enhancing our fleet of ultra-deepwater and harsh environment floaters, without compromising our liquidity or overall balance sheet flexibility.

“This combination with Ocean Rig further strengthens our relationships with strategic customers, while expanding our presence in the key markets of Brazil, West Africa and Norway. It also enables us to reduce our cost per active rig, as we believe that we can efficiently merge the Ocean Rig operations into our existing structure with limited incremental shore-based expense.”

With the five rigs under construction, and the two additional rigs being recycled, Transocean’s pro forma fleet will include 57 floaters.

Due to the acquisition, there would be no changes to Transocean’s board of directors, executive management team, and corporate structure. It will also continue to be headquartered in Steinhausen, Switzerland; with a presence in Houston, Texas; Aberdeen, Scotland; and Stavanger, Norway.

The transaction, which has been approved by the board of directors of both the companies, is scheduled to conclude in the first quarter of 2019, subject to the approval of shareholders of Transocean and Ocean Rig and the satisfaction of customary closing conditions.