RDC Rowan Companies Plc Class A Ordinary Shares

   By Kimberly Chin 
 

An affiliate of hedge fund Canyon Partners LLC said it intends to vote against Rowan Cos.'s (RDC) proposed deal with Ensco PLC (ESV) ahead of a shareholder vote.

Canyon Capital Advisors LLC, which has a roughly 6.3% stake in Rowan, said Monday that Ensco's proposal doesn't adequately account for increased operational risk, and undervalues Rowan.

The companies reached a deal in October for Rowan investors to receive 2.215 Ensco shares for each Rowan share held.

"The lack of a premium for Rowan shareholders fails to compensate them for the vastly increased risk that Ensco brings to the combination," Canyon wrote in the letter.

In November, Canyon built a stake in Rowan of 6.3% for about $107 million. Canyon is Rowan's fifth-largest shareholder, according to FactSet.

In a letter to the company's board of directors, the hedge fund said Monday the offshore drilling contractor would represent an operational risk because of Ensco's older fleet of midwater and deepwater offshore drilling rigs, as well as a financial risk because Ensco has billions of dollars in long-term debt, greater intermediate maturities and less cash and short-term investments available.

Rowan's board has recommended shareholders approve the Ensco deal. The company said last week the transaction is on track to close in the first half of 2019.

Rowan said in a statement Monday it is confident the deal is the best way to maximize value for shareholders in the company.

"The combination of Ensco and Rowan will create a uniquely positioned offshore drilling company with capabilities across all water depths, a significant fleet size, a broad geographic presence and a diverse customer base, with 82 rigs spanning six continents," Rowan said in a statement.

Write to Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

January 07, 2019 10:11 ET (15:11 GMT)

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