$400million Cost of Delay by Antitrust service to EDC’s deal with Schlumberger Russia’s largest onshore drilling company Eurasia Drilling Co. (EDC) reported it was delaying a bet to sell a stake in the company to oil services giant Schlumberger Ltd. while it waited for approval from the Federal Anti-Monopoly Service of Russia (FAS).
Eurasia intends to go private by delisting from the London Stock Exchange (LSE) before the deal is completed. As a result, EDC said the deal “will not take place on the expected dates previously announced by the company.” The company was supposed to delist from the LSE on February 23 as part of a $1.7 billion deal with Schlumberger, which includes two stages.
EDC Acquisition Company, a special-purpose vehicle, will buy about a 30% stake in EDC from minority shareholders and EDC will delist from the LSE. Schlumberger will pay $22 per global depositary receipt. Afterwards the US company will buy additional 14.98% from EDC’s majority shareholders to increase its interest to 45.65%. Schlumberger will get a three-year option for a 54.35% stake in EDC. However, the unusually large investment by a US-listed company in Russia’s oil industry was spotted by the president’s administration. Later, Russia’s anti-monopoly regulator requested materials on the deal.
Schlumberger responded to requests. Currently, the materials are being investigated by the regulator. After the delisting deadline had been officially delayed, Eurasia’s global depositary receipts fell 13.7% to $17 a piece. So, in a few minutes the company’s net worth lost $400 million and the capitalization sank to $2.5 billion. Eurasia’s shareholders voted for the deal.
However, the FAS approval is essential for all major mergers or acquisitions. The sale of a 45.65% stake was expected to close by Q1 2015. Schlumberger Vice-President in Russia and Central Asia Alexandr Borisov evaded comments. Eurasia Drilling Co. accounts for 29% of Russia’s drilling market. It is followed by Surgutneftegas. The total share of foreign contractors on Russia’s oilfield services market amounts to 18%.