EURASIA DRILLING OFFER: $10
Eurasia Drilling Co., the Russian oil driller whose planned acquisition by Schlumberger Ltd. collapsed last month, said it received a buyout offer from management and shareholders.
The investors, whom Eurasia didn't identify, offered $10 a share and proposed to delist the stock from London, according to a regulatory filing on Thursday. The company's board has formed a panel of non-executive independent directors to negotiate a deal.
Schlumberger decided two weeks ago not to pursue its $1.7 billion proposal to buy a minority stake in Eurasia after Russian authorities delayed approval of the deal for almost eight months. Eurasia, the country's largest driller, needs funds after its share of the Russian market shrank amid an oil-price slump that prompted its key client, Lukoil PJSC, to scale back exploration.
"Following the failure of the proposed transaction with Schlumberger, certain management and core shareholders seek to undertake significant rationalization of the business that would best be achieved by taking the company private, so it can sustain itself through the expected prolonged and difficult market conditions," Eurasia said in the statement.
The company's shares dropped 2.3 percent to $10.70 at 8:36 a.m. in London, extending their decline this year to 40 percent. A number of Russian companies including potash producer Uralkali PJSC have sought to delist from the U.K. capital after the Kremlin urged businesses to quit overseas stock markets as relations with the U.S. and Europe soured over its incursions in eastern Ukraine.
A buyout at $10 a share "would be a pretty good deal for the management and core shareholders," Artem Konchin, an oil analyst at Otkritie Financial Corp., said by e-mail. Otkritie has a target price of $17 a share for Eurasia, compared with an average estimate of $15.85 from eight analysts surveyed by Bloomberg.
Under the initial phase of the Schlumberger deal agreed on in January, Eurasia founder Alexander Djaparidze and other core investors planned to buy out minority holders for $22 a share, an 81 percent premium to the stock price at the time. The Djaparidze-led group would then have sold that 46.45 percent stake to Schlumberger, which would have later gained an option to acquire the rest.
Russia's Federal Security Service had held up the deal on concerns that Schlumberger, based in Houston and Paris, would have had too much influence in Russia's oil-services market.
Eurasia has formed a committee comprising independent directors Alexander Shokhin, Igor Belikov and the Earl of Clanwilliam to negotiate terms on behalf of the board with the assistance of adviser Renaissance Capital, according to the statement. RenCap's research unit has a $17 target price on the company, Bloomberg data show. Xenon Capital Partners will advise the buyout group.
The investors want to take Eurasia private because the company requires "maximum flexibility" as lower crude prices and "continued geopolitical risks" put pressure on its operations, according to the filing. Nicosia, Cyprus-based Eurasia has idled 20 percent of its drilling fleet, most of which was deployed at West Siberian fields, and reduced its workforce by 9.4 percent amid a slowdown in exploration.
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