Ades is absorbing Shelf Drilling through a premium-priced merger: 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, they said in a 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 closing share price 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-based consideration, and the company will be delisted from the Oslo stock exchange to become a wholly-owned private subsidiary of Ades.

The transaction will ramp up Ades’ capacity…: The merger combines 83 rigs, including 46 premium jack-ups, and extends Ades’s reach into new markets. Shelf Drilling — which operates across the Middle East, Southeast Asia, India, West Africa, the Mediterranean, and the North Sea — adds a USD 1.5 bn firm backlog to the mix, taking the combined group’s order book to USD 9.45 bn.

…and help realize USD 40-50 mn in annual cost savings over the medium term, with the transaction forecast to lift earnings per share and boost cashflow. The transaction also enables Ades to call and settle Shelf Drilling’s c. USD 1.4 bn senior notes and Norwegian bond obligations, thereby optimizing the capital structure of the merged group.

What’s next? The transaction, which is pending regulatory and customary clearances, is expected to close in 4Q. It also requires 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, which was also determined to be offered at fair value by the firm’s financial advisor Evercore, while shareholders holding 15% of the stock have also shown their support.

Shelf Drilling had a good year in 2024: The firm 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. Its revenues also rose 8.5% y-o-y during the year to USD 985.2 mn.

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 price closed at SAR 14.45 yesterday, up 9.97%.

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