Saipem has announced that it has sold all of the drilling activities on land (onshore drilling) to the KCA Deutag group for 550 million dollars (513,45 million euros) plus a 10% stake in the acquiring company after the closing of the transaction. The Italian company explains that the closure is subject to the completion of the spin-off of the business divested from Saipem and the completion of thecapital increase of 2 billion euro of Saipem and will take place by 31 October 31 for activities in the Middle East and by 2023 March 1,74 for the Americas. Meanwhile, in Piazza Affari, Saipem shares dropped 5,53% to XNUMX euros.
In the context of the transaction, Saipem is assisted by JP Morgan and Lazard. While Barclays and Houlihan Lokey respectively acted as financial and debt advisors for Kcad.
Onshore drilling activity
Saipem operates with its onshore drilling activities globally outside Italy, especially in the Middle East and the Americas, in 13 countries, with around 4 people and a portfolio of 83 owned onshore drilling rigs. Saipem's onshore drilling business recorded full-year 2021 revenues of €347 million and an adjusted EBITDA of €82 million; Onshore drilling adjusted EBITDA is expected to account for approximately 20% of Saipem's adjusted consolidated EBITDA for the full year 2022.
For its part, KCA Deutag – active in the drilling, engineering and technology sector, which operates both on land and at sea – manages approximately 110 drilling rigs in 20 countries and employs 8.300 people. In FY 2021, KCAD reported consolidated revenues of $1.196 million and adjusted EBITDA of $237 million. Consolidated net debt at the end of 2021 was $396 million.
Improving liquidity
The Italian company underlines in a note "that the transaction does not involve any transfer of financial debts from Saipem to Kcad and that the proceeds will improve Saipem's liquidity, reducing net borrowing and supporting the realization of his business plan 2022-2025”. The acquisition in turn explains KCA Deutag, led by CEO Joseph Elkhoury, will create an onshore drilling hub with over 1,6 billion dollars in revenues and an order book of 7,2 billion dollars.
“The addition of Saipem's onshore drilling activities in Kcad, which is already among the most renowned international drilling operators, will bring further opportunities for value creation thanks to the operational synergies and experience brought by Saipem; in turn, Saipem will be able to benefit from its minority stake in the thus enhanced entity", explains the group led by the CEO in a note, Francesco Caio. Furthermore, "the transaction represents for Saipem a further step towards a more focused and resilient business model, based on the growth trends of its reference markets, concentrating efforts in the offshore drilling sector and at the same time supporting the achievement of capital and liquidity structure”, concludes the group.
