NEW YORK, Sept. 13, 2017 /PRNewswire/ -- Arrowgrass
Capital Partners (US) LP today sent an open letter to the
shareholders of Ensco plc (NYSE: ESV) urging them to vote against
Ensco's proposed merger with Atwood Oceanics, Inc.
The full text of the letter is below and has also been filed
with the Securities and Exchange Commission (SEC) and is available
on the SEC's website at
https://www.sec.gov/Archives/edgar/data/314808/000091412117001226/ar37517614-px14a6g.htm
An Open Letter to Fellow Ensco Shareholders
Dear Fellow Shareholders:
The opportunity to vote on the proposed Atwood transaction at the October 5th meeting is quickly
approaching. Market and industry events have only deepened our
conviction that this deal destroys value for Ensco shareholders –
it is the wrong deal at the wrong price and the wrong time.
We urge fellow shareholders to vote AGAINST
the transaction directly on Ensco's proxy card.
Shareholders with questions or needing assistance with voting
should contact Morrow Sodali, which is assisting Arrowgrass, at
800-662-5200 or 203-658-9400 or by email at
saveensco@morrowsodali.com. We provide access to our materials
opposing this deal (which have previously been filed with the
Securities and Exchange Commission ("SEC") and are available on the
SEC's website at www.sec.gov) at www.saveensco.com. Fellow
shareholders should feel empowered to save Ensco from this flawed
transaction.
Arrowgrass has opposed the Atwood transaction for the following
reasons:
- Wrong Price: Even based on management's projections,
this transaction is dilutive on all relevant metrics. The proposed
Ensco/Atwood stock exchange ratio
is at an unjustifiable premium to all-time highs with Ensco stock
now at 20-year lows.
- Wrong Time: Atwood
faces a liquidity wall while burning cash and there is no rush to
bail them out at a large premium.
- Destroys Optionality: Inappropriately increases risk by
shortening runway and weakening the balance sheet, while giving
away substantial upside in a recovery.
- Wrong Paradigm: Ensco is selling stock on unacceptable
terms, not just buying assets.
Ensco management has taken great pains to argue that they are
buying high-quality, desirable assets at an acceptable price, but
ignores the question on which we are actually voting: issuing
shares. Ensco is selling stock at dramatically discounted levels on
an absolute and especially on a relative basis. Not owning
Atwood has not held back Ensco
from operational wins, including versus Atwood and other competitors in the past
months, but the market has punished and will continue to punish
Ensco for balance sheet and fiduciary imprudence. This is
especially concerning given Ensco's prior reputation for
patience.
As we update our observations and analysis to the eve of the
vote, we find further supportive evidence and address incremental
considerations and comments by Ensco management.
Ensco shares are down 28% since deal announcement, a clear
indictment in and of itself. This, and Ensco's relative
underperformance, has only continued as management defends the
deal.
Management argues they have an information edge with an "inside
view" that the market does not fully grasp from the "outside in".
Yet, according to their forecasts (on which all of our publicly
disclosed analyses are based), this deal is highly dilutive on
every metric even in bullish scenarios. Ensco's own forecasts are
the best arguments against this transaction.
Ensco now argues that it knew Atwood would not be able to renew a contract
that represented ~50% of consensus EBITDA. News of Atwood losing the contract came only 50 days
after the deal was announced and came as a surprise to the market
(i.e. it was not priced into Atwood's share price during the negotiation).
Moreover, it was Ensco that won the contract from Atwood, and this win was not priced into
Ensco's share price. Accordingly, the premium Ensco is paying
is even greater than shareholders have been led to believe.
The myriad inconsistencies, the flawed arguments and the sheer
difficulty management has faced in making the numbers work have
made it increasingly clear that something in the process went
terribly wrong when this deal moved from concept to
execution/timing/negotiation/valuation.
A vote for this transaction is a lose-lose proposition: it
burdens Ensco with substantially more operational and balance sheet
risk in adverse scenarios while unjustifiably giving away all of
the upside, which should accrue to shareholders, in recovery
scenarios. Ensco's own projections bear this out.
However, voting AGAINST the transaction is a WIN-WIN for Ensco
shareholders. This deal would either fall apart or Ensco would be
empowered to renegotiate substantially improved terms. If the deal
falls apart, Ensco should recover from the sharp underperformance
and would be in a stronger position to participate in value
accretive consolidation in the future. If the deal is renegotiated
at materially better terms, it would also be a win for Ensco
shareholders. There is no downside in voting AGAINST this deal.
We urge shareholders not to allow Ensco to sneak this flawed
deal through due to shareholder complacency. Please make your views
known. Pick up the phone or email your proxy advisor and articulate
your thoughts directly to them (more details about how to get
involved on www.saveensco.com).
We may not have the "inside view" but we have something much
more powerful in our favor, the benefit of hindsight. This deal has
already cost shareholders 28%. We should use the safety valve of
the vote to save Ensco from making a very expensive mistake.
Regards,
Michael Edwards - Partner and US
Head
Daniel Henriques - Head of
Energy
Arrowgrass Capital Partners
Arrowgrass is not soliciting proxies relating to the Ensco or
Atwood special shareholder
meetings and does not have the authority to vote your proxy.
Arrowgrass is not asking for your proxy card and cannot accept your
proxy card. Please DO NOT send us your proxy card.
The views expressed in this letter (the "Letter") represent the
opinions of Arrowgrass Capital Partners LLP and/or certain
affiliates ("Arrowgrass") and the investment funds it manages that
hold shares in Ensco plc (the "Company"). This Letter is for
informational purposes only, and it does not have regard to the
specific investment objective, financial situation, suitability or
particular need of any specific person who may receive the Letter,
and should not be taken as advice on the merits of any investment
decision. The views expressed in the Letter represent the opinions
of Arrowgrass, and are based on publicly available information and
Arrowgrass analyses. Certain financial information and data used in
the Letter have been derived or obtained from filings made with the
Securities and Exchange Commission ("SEC") by the Company or other
companies that Arrowgrass considers comparable. Arrowgrass has not
sought or obtained consent from any third party to use any
statements or information indicated in the Letter as having been
obtained or derived from a third party. Any such statements or
information should not be viewed as indicating the support of such
third party for the views expressed in the Letter. Information
contained in the Letter has not been independently verified by
Arrowgrass, and Arrowgrass disclaims any and all liability as to
the completeness or accuracy of the information and for any
omissions of material facts. Arrowgrass disclaims any obligation to
correct, update or revise the Letter or to otherwise provide any
additional materials. Neither Arrowgrass nor any of its affiliates
makes any representation or warranty, express or implied, as to the
accuracy, fairness or completeness of the information contained
herein and the recipient agrees and acknowledges that it will not
rely on any such information. Arrowgrass recognizes that the
Company may possess confidential information that could lead it to
disagree with Arrowgrass's views and/or conclusions.
Funds managed by Arrowgrass currently beneficially own, and/or
have an economic interest in, shares of the Company. These funds
are in the business of trading— buying and selling—securities.
Arrowgrass may buy or sell or otherwise change the form or
substance of any of its investments in any manner permitted by law
and expressly disclaims any obligation to notify any recipient of
the Letter of any such changes. There may be developments in the
future that cause funds managed by Arrowgrass to engage in
transactions that change the beneficial and/or economic interest in
the Company.
The Letter may contain forward-looking statements which reflect
Arrowgrass's views with respect to, among other things, future
events and financial performance. Forward-looking statements are
subject to various risks and uncertainties and assumptions. There
can be no assurance that any idea or assumption herein is, or will
be proven, correct. If one or more of the risks or uncertainties
materialize, or if Arrowgrass's underlying assumptions prove to be
incorrect, the actual results may vary materially from outcomes
indicated by these statements. Accordingly, forward-looking
statements should not be regarded as a representation by Arrowgrass
that the future plans, estimates or expectations contemplated will
ever be achieved.
Under no circumstances is the Letter to be used or considered as
an offer to sell or a solicitation of an offer to buy any security,
nor does the Letter constitute either an offer to sell or a
solicitation of an offer to buy any interest in funds managed by
Arrowgrass. Any investment in the Arrowgrass Funds is speculative
and involves substantial risk, including the risk of losing all or
substantially all of such investment.
Arrowgrass UK is a Limited Liability Partnership registered in
England and Wales (FCA Firm reference number 413647).
Registered office: 3rd Floor, 10 Portman Square, Marylebone,
London W1H 6AZ
About Arrowgrass
Arrowgrass Capital Partners is a London headquartered alternative asset manager
that was founded in February 2008. As
of August 1, 2017, the firm managed
approximately $6.2 billion and had
144 employees across its New York
and London offices.
Arrowgrass Capital Partners LLP is FCA regulated and both
Arrowgrass Capital Partners LLP and Arrowgrass Capital Partners
(US) LP (together, "Arrowgrass") are registered with the SEC and
CFTC.
Press Contact
Please address press inquiries to Arrowgrass spokesperson
Nick Lord at +44 7501 271 083.
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SOURCE Arrowgrass Capital Partners (US) LP