Ades is absorbing Shelf Drilling: Ades International Holding, a subsidiary of Tadawul-listed Ades Holding, has agreed to take over Dubai-based and Oslo-listed offshore drilling contractor Shelf Drilling in a SAR 1.4 bn (USD 379 mn) merger, according to a joint statement (pdf).

The details: The agreement will see Ades pay NOK 14 (c. SAR 5) per share, representing a 62% premium to Shelf Drilling’s close on 4 August. The buyer will tap its available credit lines to finance the acquisition. All of Shelf Drilling’s existing shares will be cancelled in exchange for the banknote payment once the transaction is finalized, and the company will be delisted from Oslo to become a wholly-owned private subsidiary of Ades.

What’s next: The transaction is expected to close in 4Q, pending regulatory and customary clearances,. It will also require approval by a two-thirds vote at a general meeting scheduled for mid-September. Shelf Drilling’s BoD has already approved and recommended the merger, with support from shareholders holding 15% of the stock.

Getting that capacity in there: The merger combines 83 rigs, including 46 premium jack-ups, and extends Ades’s reach into new markets. Shelf Drilling adds a USD 1.5 bn firm backlog to the mix, taking the combined group’s order book to USD 9.45 bn. Ades expects USD 40-50 mn in annual cost synergies over the medium term, with the transaction forecast to lift earnings per share and ramp up free cashflow. The transaction will also enable Ades to call and settle Shelf Drilling’s USD 1.3 bn senior notes and Norwegian bond obligations, thereby optimizing the capital structure of the enlarged group.

About Shelf Drilling: Founded in 2012, the international shallow-water offshore drilling contractor operates across the Middle East, Southeast Asia, India, West Africa, the Mediterranean, and the North Sea.

Earnings snapshot: Shelf Drilling reversed two years of net losses in 2024, recording USD 52.6 mn in net income last year up from a net loss of USD 17.2 mn in 2023, according to Ades’s disclosure to Tadawul. The firm’s revenue stood at USD 985.2 mn over the same period, up 8.5% y-o-y.

ICYMI- Ades Holding’s net income slipped 5.2% y-o-y to SAR 191.7 mn in 2Q, while revenues inched up 3.5% y-o-y to SAR 1.6 bn. Meanwhile,

ADVISORS- SpareBank 1 Markets is quarterbacking the transaction as Ades’s sole financial advisor, with Schjødt and Maples Group providing counsel. Meanwhile, Evercore is advising Shelf Drilling, with Advokatfirmaet Thommessen AS, Conyers and Latham & Watkins providing counsel.

Market reax: Ades’ share prices soared 10% to SAR 14.45 on market close.

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