Shares of Transocean Ltd advanced approximately 6% in Tuesday's pre-market session following the announcement of a definitive agreement to acquire rival offshore driller Valaris Ltd in an all-stock transaction valued at $5.8 billion. Valaris stock surged about 34% on the news.
Creating an Offshore Drilling Leader
The merger will combine the two companies' fleets, resulting in a combined entity operating 73 rigs, including deepwater drillships, semisubmersibles, and jackups. The combined company will hold a substantial order backlog of roughly $10 billion in future contracted revenue. According to the companies, approximately 80% of the merged fleet is already contracted for 2026, with about 60% booked for 2027.
Financial Structure and Debt Focus
The deal is structured as an all-stock transaction, with Valaris shareholders receiving 15.235 Transocean shares for each Valaris share held. Upon closing, expected in the second half of 2026 pending regulatory and shareholder approvals, Transocean shareholders will own approximately 53% of the fully diluted combined company. Transocean CEO Keelan Adamson emphasized the transaction's role in addressing the company's debt burden, which stood at $4.85 billion in long-term debt at the end of September. "We know that our debt level negatively impacts our equity value. This transaction addresses that," Adamson stated.
The investor presentation filed with regulators estimates the pro forma enterprise value at nearly $17.2 billion, with a market capitalization of about $12.3 billion. The companies anticipate achieving cost synergies exceeding $200 million.
Market Reaction and Analyst View
The significant pre-market move in both stocks reflects investor sentiment on the deal's prospects. BTIG analyst Gregory Lewis raised his price target on Transocean to $10 from $6 while maintaining a Buy rating, according to a report from Gurufocus.
Looking ahead, Transocean is scheduled to report its fourth-quarter earnings and provide a fleet status update on February 19, with a management conference call the following day. The deal's completion remains subject to customary closing conditions, and its benefits could be impacted by potential shifts in offshore contracting activity or oil prices.
