Maintaining Transocean Fair Value Estimate After Announcement of Proposed Acquisition of Ocean Rig
We are maintaining our Transocean fair value estimate of $8.25 per share after the company's announcement that it has entered into an agreement to acquire Ocean Rig for $2.7 billion in total consideration (equivalent to about 20% of the company's current enterprise value). Based on a acquisition price of about 50% of book value, we think the deal overvalues Ocean Rig somewhat in an absolute sense but undervalues Ocean Rig relative to no-moat Transocean's inflated shares. Therefore, with the deal...
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