- Joint venture company (Company) will combine the Baker Hughes
Subsea Drilling Systems (SDS) business and MHWirth to better serve
customers while simultaneously driving productivity and cost
synergies
- Company will have dual operational headquarters in Houston, TX
and Kristiansand, Norway
Baker Hughes (NYSE:BKR) and Akastor ASA (Oslo:AKAST) have
announced an agreement to create a joint venture company (Company)
that will bring together Baker Hughes’ Subsea Drilling Systems
(SDS) business with Akastor’s wholly owned subsidiary, MHWirth AS
(MHWirth). The Company will deliver a global full-service offshore
drilling equipment offering that will provide customers with a
broad portfolio of products and services.
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The transaction will result in a leading equipment provider with
integrated delivery capabilities, financial strength, and
flexibility to address a full range of customer priorities. The
Company will be owned 50-50 by Baker Hughes and Akastor, and
following the closing of the transaction, the Company’s operations
will be managed from current offices in Houston, Texas, and
Kristiansand, Norway. Merrill A. “Pete” Miller will serve as
chairman and chief executive officer. Miller has been in the oil
and gas industry over 40 years holding various leadership roles
including chairman, president and chief executive officer of
National Oilwell Varco.
The Company’s broader scope of services will also provide a more
solid foundation for future growth, including the capability to
participate in the oil and gas industry’s transition towards more
energy-efficient solutions, as well as deploying technologies and
service solutions to make the sector more competitive through
increased drilling efficiency.
“I would like to express sincere gratitude to the good work and
dedication shown by the respective teams of Baker Hughes and
Akastor for making this happen despite the current challenges
caused by the global COVID-19 pandemic,” said Karl Erik Kjelstad,
CEO of Akastor. “I strongly believe that this Company will give a
solid basis for both organizations to meet the current challenges
in today’s market and to continue as a leader in developing
advanced and efficient drilling solutions that support the
industry’s transition towards more sustainable operations.”
“This transaction is a major step for MHWirth, and the
transformation strategy announced in February 2019,” said Kristian
M. Røkke, chairman of Akastor. “The Company will offer customers a
strengthened product offering and investors attractive value
creation. This transaction will also allow Akastor to maximize, and
ultimately realize, value to its shareholders.”
“The oil and gas industry is rapidly evolving, and we are
constantly looking at new and innovative ways of delivering value
to our customers,” said Neil Saunders, executive vice president of
Oilfield Equipment at Baker Hughes. “This Company is the perfect
fit between our respective portfolios and further transforms our
core operations for long-term success, bringing complementary
solutions to market and offering our customers a full offshore
drilling equipment package.”
MHWirth is a global provider of advanced drilling solutions and
services designed to offer customers a safer, more efficient and
reliable alternative. MHWirth has a global span covering five
continents with offices in 13 countries.
Baker Hughes’ SDS business is a division of the Oilfield
Equipment segment of Baker Hughes and is headquartered in Houston.
SDS provides integrated drilling products and services worldwide,
with service and manufacturing facilities in 11 countries and a
competitive portfolio, including world-class blowout preventor
(BOP) systems, controls and riser equipment.
The closing of the transaction is subject to customary
conditions, including regulatory approvals, and is expected to
occur in the second half of 2021. Morgan Stanley, Paul Weiss,
Thommessen, and EY are acting as advisors for Baker Hughes. Goldman
Sachs, BAHR, Sidley Austin, and EY are acting as advisors for
Akastor.
Key Financial information
The table below provides certain estimated pro-forma financial
information for the combined operations of SDS and MHWirth. This
information is unaudited, based on management accounts for the
respective companies and provided for illustrative purposes only.
It may not be representative of reported figures following
completion of the transaction. Further, the information may not
necessarily be comparable to similar information presented by other
companies nor relied upon as any indication of what the Company’s
financial position or results of operations actually would have
been had the transaction been consummated as of the dates
indicated.
USD in million1
FY 2020 Aggregated estimates
(unaudited)
FY 2019 Aggregated estimates
(unaudited)
FY 2018 Aggregated estimates
(unaudited)
Revenue2
713
850
731
Adjusted EBITDA (IAS 17)3
102
139
93
Note:
1 Average FX used for corresponding
period
2 Pro forma MHWirth Group figures include
MHWirth, Bronco Manufacturing (which has been part of MHWirth since
June 2019) and Step Oiltools (which became part of MHW Group in
February 2020)
3 Items affecting comparability comprises
material items outside normal business such as net gains or losses
from business and assets disposals, costs for closure of business
operations and restructurings, and other costs of non-recurring
nature
Transaction structure and main conditions
The Company shall be owned 50/50 by Baker Hughes and Akastor.
Akastor shall contribute its shares in MHWirth to the Company in
return for 50% of the shares and USD 120 million in consideration,
of which USD 100 million is payable in cash at closing. Baker
Hughes shall contribute the SDS business to the Company in return
for the other 50% of the shares and USD 200 million in
consideration, of which USD 120 million is payable in cash at
closing. The Company shall issue notes to Baker Hughes and Akastor
representing the balance of the consideration owed to them. The
notes shall be subordinated to the Company’s external debt
financing.
The Company will finance the cash consideration payable to Baker
Hughes and Akastor by way of a USD 220 million bank facility. In
addition, the Company will also be financed by a USD 80 million
working capital facility.
The Transaction Agreement entered into by Akastor and Baker
Hughes provides for customary terms for agreements of this nature,
including representations and warranties relating to the businesses
being contributed as well as an agreed form shareholders agreement
customary for a 50/50 controlled company, including governance and
exit provisions. Completion of the Transaction is subject to
customary conditions, including regulatory approval. The closing of
the Transaction is expected to take place in 2H 2021.
Implications for Akastor’s corporate credit facility and
accounting policies
The transaction will require the refinancing of Akastor’s
existing corporate credit facility. Akastor has received
commitments for a NOK 1,250 million revolving credit facility that
will be entered into prior to closing of the transaction.
Following completion of the transaction, it is expected that
MHWirth no longer shall be accounted for as a consolidated
subsidiary of Akastor. Instead, it is expected that Akastor shall
treat the Company as a joint venture for accounting purposes and
that, following which Akastor shall recognise 50% of the equity of
the Company and 50% of the Company net profits in its accounts
based on the “equity method”.
Implications for Baker Hughes’ accounting policies
Following completion of the transaction, it is expected that SDS
will no longer be accounted for under Baker Hughes’ Oilfield
Equipment segment. Instead, it is expected that BKR shall treat the
Company as a joint venture for accounting purposes, following which
BKR shall recognise 50% of the equity of the Company and 50% of the
Company net profits in its accounts based on the “equity
method.”
About Baker Hughes:
Baker Hughes (NYSE: BKR) is an energy technology company that
provides solutions to energy and industrial customers worldwide.
Built on a century of experience and with operations in over 120
countries, our innovative technologies and services are taking
energy forward – making it safer, cleaner and more efficient for
people and the planet. Visit us at bakerhughes.com.
About MHWirth and Akastor:
MHWirth is a wholly owned subsidiary of Akastor and accounts for
a material part of Akastor’s revenues and assets. Akastor has
reported MHWirth as a separate segment in its financial statements.
MHWirth, with its subsidiaries, is a self-sufficient group which is
a global provider of integrated drilling solutions and services
with world class technology, leading engineering and project
management capabilities. The MHWirth group delivered in the range
of 25% of all offshore drilling packages for floaters between years
2000 and 2018. With its headquarters in Kristiansand, MHWirth’s
global operations covers five continents with offices in 13
countries.
Akastor is a Norway-based oil-services investment company with a
portfolio of industrial holdings and other investments. The company
has a flexible mandate for active ownership and long-term value
creation.
The management of Akastor and MHWirth will hold an investor
conference in relation to the announced transaction on Tuesday
March 2, 2021 at 14:00 CET, which will be held as a webcast only
and audiocasted live. There will be a Q&A session following the
presentation. The replay will be made available on Akastor’s
website.
Live webcast and replay link:
https://channel.royalcast.com/landingpage/hegnarmedia/20210302_2/
The presentation will be available at www.akastor.com
This information is subject to the disclosure requirements
pursuant to Regulation EU 596/2014 (MAR) article 17, cf section
5.12 of the Norwegian Securities Trading Act.
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version on businesswire.com: https://www.businesswire.com/news/home/20210301006121/en/
Baker Hughes Investor Relations Jud Bailey +1
281-809-9088 investor.relations@bakerhughes.com Baker Hughes
Media Relations Thomas Millas +1 713-879-2862
Thomas.millas@bakerhughes.com Akastor Øyvind Paaske Chief
Financial Officer Tel: +47 917 59 705 Oyvind.paaske@akastor.com
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