Shelf Drilling, Ltd. (SHLF) and Shelf Drilling (North Sea), Ltd. (SDNS) today announce that the entities, including SHLF MergCo, have entered into an agreement and plan of merger whereby SDNS will become a wholly owned subsidiary of SHLF, solidifying SHLF’s position as a leading global jack-up operator. Shareholders of SDNS representing well in excess of the voting rights necessary to approve the Proposed Merger have irrevocably undertaken to vote in favour of the necessary resolutions to approve the Proposed Merger at a general meeting of SDNS expected in October 2024. The directors of SDNS who are considered independent of SHLF have approved and recommended the Proposed Merger.

The combination will fully consolidate SHLF’s jack-up fleet, solve the previously disclosed funding gap in SDNS in an efficient manner and allow SHLF to fully support the SDNS entity going forward. The combined company will draw benefits from a simplified capital structure, while investors should benefit from a more liquid, tradeable share. 

The Proposed Merger is structured as a triangular merger between an indirect subsidiary of SHLF (“SHLF MergCo”), SDNS (as the surviving entity in the Proposed Merger), and SHLF as the issuer of the merger consideration shares.

As part of the Proposed Merger, the shareholders of SDNS (other than SHLF, SDNS or any of their direct or indirect subsidiaries) would receive as consideration for each SDNS share being cancelled in the Proposed Merger: 

• 1.05 merger consideration shares in SHLF (the “Merger Shares”); and 
• a cash consideration of NOK 8.0 per SDNS share, (together the “Merger Consideration”).

This represents a total consideration of NOK 25.90 per SDNS share, and corresponds to an equity value of SDNS of approximately NOK 2.6 billion, based on a value per SHLF share of NOK 17.05, corresponding to the closing trade price on the Oslo Stock Exchange as of September 13, 2024. The total cash consideration element of the Merger Consideration amounts to approximately the NOK equivalent of USD 30 million. 

The Merger Consideration represents a premium of 13% to the market exchange ratio based on closing prices of shares of SHLF and SDNS (NOK 23.00 on Euronext Growth) on September 13, 2024, and a premium of 21% and 24% to the exchange ratios calculated using the volume weighted average share prices for both companies in the 1-month and 6-month periods calculated from September 13, 2024. 

Fractions of shares will not be issued and allotted. In lieu of issuance of any fractional share for SDNS shareholders who would otherwise have been entitled to a fraction of a SHLF share shall be paid cash calculated using an average share price calculation of the SHLF share prior to completion of the Proposed Merger.

It is expected that approximately 42 million new shares in SHLF will be issued as consideration for the Proposed Merger. The Merger Shares will be issued from the previously authorised but unissued shares of SHLF. 

SHLF has an indirect shareholding in SDNS of 60%, and such existing SDNS shares shall continue to be SDNS shares upon the Proposed Merger, with SHLF not being entitled to the Merger Consideration. 

Following the completion of the transaction, existing SHLF holders will own approximately 84% of SHLF, and SDNS shareholders (other than SHLF) will own approximately 16% of SHLF.

Shelf Drilling CEO, Greg O’Brien, said 
“Combining Shelf Drilling North Sea into Shelf Drilling fulfills our ambition to streamline the Shelf Drilling company structure. The combination offers a pure play investment opportunity with exposure to a uniquely positioned jack up fleet and platform servicing customers across the regions where we operate. The transaction high-grades the Shelf Drilling fleet with four premium jack ups and one ultra harsh jack up and allows for Shelf Drilling to finance the USD 40m funding need in Shelf Drilling North Sea in an efficient manner. Moreover, we expect shareholders in the combined company to gain improved trading liquidity and better access to capital markets. This transaction further underlines our commitment to driving value for all of our stakeholders and is consistent with our focus of being a market leader in core jack-up regions globally.”

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