Investing.com - Transocean Ltd 's (NYSE:RIG) shares plunged to an all-time low on Tuesday as investors grew concerned about the dilution caused by the company’s purchase of Norwegian competitor Songa Offshore.
Transocean announced pre-market Tuesday that it will buy competitor Songa Offshore for 9.1 billion Norwegian crowns. The transaction will mostly be mostly paid for in shares and convertible bonds.
Under terms of the deal, Songa shareholders will receive 50% newly issued RIG common shares and 50% in bonds convertible into common shares; RBC analyst Kurt Hallead expects RIG to issue 128.2 million shares, including convertibles, diluting current shareholders by 32% to 524.7 million shares.
While the big share dilution is currently upsetting the street, analysts are confident over the longer-term positive implications. Highlights include that it will increase Transocean's order book by $4.1 billion to a total of $14.3 billion.