, January 20, 2015

Announcement of proposed merger and intention to de-list GDRs

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NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION

20 JANUARY 2015

EURASIA DRILLING COMPANY LIMITED

ANNOUNCEMENT OF PROPOSED MERGER AND INTENTION TO DE-LIST GDRS

Eurasia Drilling Company Limited (the "Company") announces that it has today agreed with certain members of the Company's management team and certain significant shareholders (the "Participants") the terms of a merger (the "Merger") between the Company and EDC Acquisition Company Limited ("EACL"), a company formed by one of the Participants solely for the purposes of the Merger, under the provisions of the Companies Law (2013 Revision) of the Cayman Islands, as amended (the "Cayman Companies Law"). The Company's board of directors formed a special committee (the "Special Committee"), comprising the Earl of Clanwilliam (as chairman of the Special Committee), Igor Belikov and Alexander Shokhin, who are independent non-executive directors of the Company and unaffiliated with EACL and any of the Participants or their affiliates, to negotiate exclusively the terms of the Merger for and on behalf of the Company with the assistance of advisers appointed by the Special Committee.

The Company expects to convene an Extraordinary General Meeting of the shareholders of the Company (the "Shareholders") for Monday 16 February 2015 at 12 noon (GMT) at the offices of Vinson & Elkins RLLP, CityPoint, 33rd Floor, One Ropemaker Street, London EC2Y 9UE (the "Extraordinary General Meeting").

At the Extraordinary General Meeting, the Shareholders will be asked to consider and vote upon a proposal to approve the plan of merger (the "Plan of Merger") between the Company and EACL and the transactions contemplated by the Plan of Merger. Under the terms of the Plan of Merger, the Company will be merged with EACL, with the Company continuing as the surviving company after the Merger. The Plan of Merger is made pursuant to a merger implementation agreement dated 20 January 2015 between the Company and EACL (the "Merger Implementation Agreement").

The Company further announces that, subject to the approval of the Plan of Merger and the Merger becoming effective (the date on which the Merger becomes effective being the date that the Plan of Merger is registered by the Cayman Islands Registrar of Companies (the "Effective Date")), it intends to cancel the listing of the global depositary receipts ("GDRs") representing its issued and outstanding shares with a nominal or par value of US$0.01 each (the "Shares") on the Official List of the UK Financial Conduct Authority and the admission of the GDRs to trading on the London Stock Exchange with effect from or around Monday 23 February 2015. Subject to the Merger becoming effective, the Company has also provided written notice to The Bank of New York Mellon as depositary for the GDR programme (the "Depositary") terminating the deposit agreement in respect of the GDRs (the "Deposit Agreement") with effect from or around Friday 6 March 2015. A separate notification of such termination and a notification that the Extraordinary General Meeting has been convened and setting out the procedure for GDR holders to exercise their voting rights will be issued by the Depositary to GDR holders.

If the resolution to approve the Merger is passed at the Extraordinary General Meeting by the requisite percentage of the Shareholders and the Merger is consummated:

  • each of the Shares in issue and outstanding at the Merger Consideration Record Date (as defined below), other than the Excluded Shares (as defined below), will be cancelled in exchange for payment of cash consideration of US$22.00 per Share (the "Merger Consideration") following completion of the Merger or, in the case of Dissenting Shares (as defined below), the fair value of the Shares as determined in accordance with section 238 of the Cayman Companies Law;
  • Dissenting Shares shall cease to confer upon any Dissenting Shareholder (as defined below) any of the rights of a member except the right to payment of the fair value of such Dissenting Shares held by them, the right to participate in proceedings until the determination of fair value is reached and the right to institute proceedings to obtain relief on the ground that the Merger is void and unlawful subject to and in accordance with the provisions of section 238 of the Cayman Companies Law, unless any holders of Dissenting Shares fail to perfect or effectively withdraw or lose their dissenter rights, in which event they shall receive the Merger Consideration;
  • each share of EACL issued and outstanding as at the Effective Date shall be converted into and exchanged for one Share;
  • each Share held by EACL in issue and outstanding as at the Merger Consideration Record Date shall be cancelled by operation of law at the Effective Date; and
  • each Share held by the Participants in issue and outstanding as at the Merger Consideration Record Date shall remain issued and outstanding as at and following the Effective Date.

The "Dissenting Shares" are any Shares owned by "Dissenting Shareholders" who have validly exercised and have not effectively withdrawn or lost their rights to dissent from the Merger in accordance with section 238 of the Cayman Companies Law and who have the right to seek payment of the fair value of their Shares.

The "Excluded Shares" are the Shares that will be held by EACL and the Participants at the Effective Date representing approximately 69.33% of the Company's total outstanding Shares.

"Merger Consideration Record Date" means 5 p.m. (EST) on the business day immediately prior to the day on which the Plan of Merger is filed with the Cayman Islands Registrar of Companies.

The Merger Consideration represents a premium of 81.1% over the GDR price on 19 January 2015.

It is proposed that the Merger Consideration will be financed by a loan of approximately US$991 million provided by a subsidiary of Schlumberger Limited ("SLB") to EACL in accordance with the terms of a convertible loan agreement entered into between such subsidiary of SLB ("SLB Subsidiary") and EACL on 20 January 2015 (the "Convertible Loan Agreement"). The Merger will not be completed unless all of the conditions precedent in the Convertible Loan Agreement have been satisfied or waived (where applicable) by the relevant time.

On or around the Effective Date, SLB Subsidiary and EACL have agreed that the convertible loan facility will be converted into new Shares in an amount equal to the number of Shares (other than the Excluded Shares) cancelled by operation of law as part of the Merger at a conversion price of US$22.00 per Share. Following such conversion under the Convertible Loan Agreement, SLB Subsidiary and another affiliate has agreed to acquire approximately a further 14.98% of the Shares from the Participants in accordance with and subject to the terms of a share purchase agreement between SLB Subsidiary and such affiliate and the Participants dated 20 January 2015 (the "Share Purchase Agreement"). SLB Subsidiary has agreed to pay US$176 million to the Participants for an option (the "Call Option") to acquire the balance of the Participants' Shares subject to and in accordance with the terms of a call option agreement dated 20 January 2015 (the "Call Option Agreement"). The Call Option is exercisable in whole (but not in part only) by SLB Subsidiary during a two year period commencing three years from completion of the acquisition of approximately 14.98% of the Shares.

The Company anticipates that on the Effective Date, following conversion of the convertible loan facility into Shares pursuant to the Convertible Loan Agreement and acquisition of approximately 14.98% of the Shares from the Participants in accordance with the Share Purchase Agreement, approximately 54.35% of the Shares will be held directly or indirectly by the Participants and approximately 45.65% of the Shares will be held directly or indirectly by SLB through its group companies.

Conditional on the implementation of the Merger, SLB Subsidiary has agreed to pay certain of the Participants an aggregate of US$44 million under non-competition agreements between SLB Subsidiary and certain of the Participants.

The Merger cannot be implemented unless the Plan of Merger and the transactions contemplated by the Plan of Merger, including the Merger, are passed by an affirmative vote of a majority of at least two-thirds of the votes of those Shareholders present and entitled to vote and voting in person or by proxy at the Extraordinary General Meeting. It is expected that the holders of the Shares currently owned directly or indirectly by the Participants and which comprise approximately 69.33% of the issued Shares will vote in favour of the resolution to be voted on at the Extraordinary General Meeting.

Pursuant to the terms of the Merger Implementation Agreement, in addition to approval by Shareholders and the shareholder of EACL, the filing of the Plan of Merger with the Cayman Islands Registrar of Companies is subject to certain conditions, including: (i) no material adverse change having arisen in relation to the Company; (ii) the Special Committee not having withdrawn its recommendation of the Merger; (iii) none of EACL, the Company, any subsidiary of the Company nor any of the Participants becoming subject to European Union or United States sanctions or sanctions extended by an Order of Her Majesty in Council to the Cayman Islands or the British Virgin Islands; and (iv) no order or judgment having been made by any governmental authority which renders unlawful, restrains or prohibits the Merger or any of the related transactions and no written notice of an intention to make such an order or judgment having been received. Unless the conditions precedent to the Merger have been satisfied or waived (where applicable) by 31 March 2015 (or such other date as is agreed between the Company and EACL), the Merger will not proceed and the Merger Implementation Agreement will be terminated.

The Special Committee considers the terms of the Merger to be fair and reasonable so far as the Shareholders (other than EACL and the Participants) are concerned and unanimously recommends that Shareholders vote FOR the special resolution to authorise and approve the Merger Implementation Agreement, the Plan of Merger and the transactions contemplated by the Plan of Merger, including the Merger. The Special Committee, in deliberating whether to recommend the Merger, has taken financial and other advice which it deems appropriate, including an opinion from Sberbank CIB on the fairness, from a financial point of view, of the consideration payable to the Shareholders (other than EACL and the Participants) under the terms of the Merger (the "Fairness Opinion"). In providing the Fairness Opinion to the Special Committee, Sberbank CIB has placed reliance on the Special Committee's commercial assessment of the Merger. Sberbank CIB is acting exclusively for the Special Committee and no one else in connection with the provision of the Fairness Opinion and will not be responsible to any person other than the Company for providing the Fairness Opinion.

A circular providing notice of the Extraordinary General Meeting and containing detailed information about the Merger and the Extraordinary General Meeting is expected to be dispatched to Shareholders today and will also be available on the Company's website - www.eurasiadrilling.com/investor-relations/EGM/.

Dissenting Shareholders will have the right to seek payment of the fair value of their Shares if the Merger is completed, but only if they deliver to the Company, before the vote is taken at the Extraordinary General Meeting, a written objection to the Merger complying with the requirements of section 238(2) and (3) of the Cayman Companies Law and subsequently comply with all procedures and requirements of section 238 of the Cayman Companies Law for the exercise of the right to dissent. The fair value of the Dissenting Shares as determined under the Cayman Companies Law could be more than, the same as, or less than the Merger Consideration which Dissenting Shareholders would receive pursuant to the Plan of Merger if such Dissenting Shareholders do not exercise the right to dissent.

Dissenters' rights are available only to registered holders of Shares. Shareholders wishing to dissent must comply with the procedures and requirements for exercising dissenters' rights with respect to the Shares under section 238 of the Cayman Companies Law.

HOLDERS OF GDRS ALONE WILL NOT HAVE A RIGHT TO ATTEND OR VOTE AT THE EXTRAORDINARY GENERAL MEETING OR DISSENT UNLESS THEY SURRENDER THEIR GDRS, PAY THE DEPOSITARY FEES (CONSISTING OF UP TO US$0.03 PER GDR SURRENDERED, A CABLE FEE OF US$17.50 AND ANY APPLICABLE TAXES OR GOVERNMENTAL CHARGES) AND BECOME SHAREHOLDERS BY 7 A.M. (EST) ON WEDNESDAY 11 FEBRUARY 2015. THE DEADLINE FOR RECEIPT OF CANCELLATION INSTRUCTIONS BY THE DEPOSITARY IS 7 A.M. (EST) ON MONDAY 2 FEBRUARY 2015. HOWEVER, A GDR HOLDER MAY, IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE DEPOSIT AGREEMENT, DELIVER TO THE DEPOSITARY VOTING INSTRUCTIONS IN RESPECT OF SOME OR ALL OF THE SHARES REPRESENTED BY ITS GDRS BY
7 A.M. (EST) ON WEDNESDAY 11 FEBRUARY 2015, WHEREUPON THE DEPOSITARY SHALL USE ITS REASONABLE ENDEAVOURS TO VOTE SUCH SHARES IN ACCORDANCE WITH SUCH VOTING INSTRUCTIONS AT THE EXTRAORDINARY GENERAL MEETING.

Neither the London Stock Exchange nor the UK Financial Conduct Authority nor any other securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this document or in any related notice of the Extraordinary General Meeting.

Vinson & Elkins RLLP and Maples and Calder are acting as the Special Committee's legal advisers in the United Kingdom and the Cayman Islands respectively in relation to the Merger.

XENON Capital Partners LLC is acting as financial adviser to EACL and the Participants. Skadden, Arps, Slate, Meagher & Flom (UK) LLP and Walkers are acting as legal advisers to EACL and the Participants in the United Kingdom and the Cayman Islands respectively in relation to the Merger. 

Enquiries:

Eurasia Drilling Company Limited
Tom O'Gallagher, Marketing and Investor Relations
Evgeniya Bitsenko, Investor Relations
+44 (0) 207 717 9707
investors.relations@eurasiadrilling.com

Hudson Sander (media enquiries for the Company)
Andrew Hayes / Elena Garside
+44(0) 20 7796 4133

XENON Capital Partners LLC
Natasha Tsukanova, Managing Director
Andrey Bulanov, Vice President
+ 7 495 644 00 10

Additional information

Sberbank CIB is acting exclusively for the Special Committee in connection with the Merger and for no one else and will not be responsible to anyone other than the Special Committee for providing the protections afforded to their client or for providing advice in relation to this announcement or any matters referred to herein.

XENON Capital Partners LLC is acting exclusively for EACL and the Participants in connection with the Merger and for no one else and will not be responsible to anyone other than EACL and the Participants for providing the protections afforded to their clients or for providing advice in relation to this announcement or any matters referred to herein.

This announcement contains certain forward-looking statements with respect to the financial condition, results of operations and business of the Company and the proposed Merger between the Company and EACL. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use future dates or words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "hope", "aim", "continue", "will", "may", "would", "could" or "should" or other words of similar meaning or the negative thereof. There are several factors which could cause actual plans and results to differ materially from those expressed or implied in forward-looking statements. Such factors include, but are not limited to, the possibility that the Merger will not be pursued or will be pursued on different terms and conditions, failure to obtain necessary approvals or to satisfy any of the conditions to the Merger, adverse effects on the market price of the GDRs and on the Company's operating results because of a failure to complete the Merger and failure to realise the expected benefits of the Merger. These forward-looking statements are based on numerous assumptions and assessments made by the Company in light of its experience and perception of historical trends, current conditions, business strategies, operating environment, future developments and other factors it believes appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this announcement could cause the Company's plans, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as at the date of this announcement. The Company assumes no obligation to update or revise the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law.

Next: 16 February 2015: Results of Extraordinary General Meeting of 16 February 2015