Seadrill's previously announced offer for Scorpion takes shape

SDRL - Seadrill files mandatory offer for remaining shares in Scorpion Offshore

"Seadrill hereby announces that an offer document where Seadrill makes a mandatory offer to acquire all outstanding shares in Scorpion not already owned or controlled by Seadrill has been filed with and approved by Oslo Børs. The offer is NOK36.00 per share in cash and the acceptance period is from and including May 10, 2010 to and including June 7, 2010 17:30 CET"

Scorpion's response

Scorpion Offshore Ltd. ("Scorpion") today announced that it received notification of the commencement of the Seadrill Limited ("Seadrill") mandatory offer period for the remaining shares in Scorpion that it does not control (the "Bid", the "Offer", or the "Seadrill Offer"). The Offer price is NOK 36.00 per share in cash, and represents a discount of 3% to the closing price of NOK 37.00 on Friday May 7th and values the total share capital of Scorpion at approximately USD 535 million. This corresponds to an enterprise value of approximately USD 1.16 billion and an implied value per Scorpion jackup rig of USD 165 million. This amount is inclusive of Scorpion's valuable contract backlog with average duration and rates at levels significantly above the current market. Therefore, the implied value of Scorpion's rigs, less the contract backlog, is significantly below the replacement cost of comparable assets.

Scorpion's financial advisors, Simmons & Company and SEB Enskilda, have approached a selected group of prospective financial and strategic buyers and are currently in discussions with several parties with the objective of producing an alternative offer for all outstanding Scorpion shares at a price level exceeding the current Seadrill Offer...

$165 million is the fair value of an uncontracted ultra premium jackup.
What's going to happen next? I think isn't likely that there will be a competing offer for three reasons: SDRL's offer doesn't grossly undervalue Scorpion, jackup dayrates are unlikely to move upwards in the near future, because of the uncontracted newbuilds and Seadrill already controls 40 percent of the company. If SDRL would hold only 10 or 20 percent of the stock then I think there might have been a realistic possibility that they'd willing to sell the position to a higher bidder. With the 40% SDRL can block anyone else from taking over Scorpion and if SDRL would be able to rise the stake to over 50 percent they could probably turn Scorpion into a mere holding company by tranferring the actual management of the rigs through contracts to Seadrill.