Transocean Sedco Forex to acquire R&B Falcon

News - August 25, 2000

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Transocean Sedco Forex has announced that it has signed a definitive agreement to acquire R&B Falcon Corporation in an all-stock transaction that will produce the industry's largest offshore drilling contractor.

The company will also become the third-largest oil services company in the world, with an equity market capitalisation of $17.7 billion, based on last Friday's Transocean Sedco Forex closing share price of $57.69.

Victor E Grijalva, Chairman of the Board of Directors of Transocean Sedco Forex, said, "The acquisition of R&B Falcon creates a new offshore drilling company that is a worldwide leader, providing compelling benefits to customers, stockholders and employees alike. R&B Falcon's 139 mobile offshore drilling units and marine barges complement the 72-rig Transocean Sedco Forex offshore fleet of modern, versatile and geographically diverse rigs, while offering a unique balance given R&B Falcon's strong position in the shallow-water US Gulf of Mexico."

"Both companies have utilised their strong technological expertise to design and manage the construction of 17 new mobile offshore drilling units, all of which are expected to be delivered by the end of the first quarter of 2001. Delivery of these rigs will complete the combined company's newbuild capital expansion program which has been the largest in the industry's history and will add exciting new capabilities to our fleet."

Paul B Loyd, Jr, Chairman of the Board of Directors and Chief Executive Officer of R&B Falcon Corporation said, "This transaction clearly creates the world's premier offshore drilling company and enhances R&B Falcon's shareholder value substantially. Thecombined company will be better able to meet our customers' needs in the growing deepwater and domestic natural gas segments. I firmly believe R&B Falcon's outstanding fleet, professional rig crews and support staff will be invaluable in creating one ofthe world's largest and most capable oil service companies. Integration of the fleets should proceed smoothly as both companies share a commitment to excellence in operations, engineering, safety and the environment and customer service. The new company, with its leading edge equipment, geographical andfleet diversification, outstanding personnel and financial strength will, in my view, become the best positioned company in the oil service sector."

J Michael Talbert, President and Chief Executive Officer of Transocean Sedco Forex, stated, "Over the past several years, our company has employed a business strategy that has allowed us to capitalise on several opportunities that have driven our rapid growth since 1996. Most recently, our December 1999 merger with Sedco Forex Holdings Limited provided the company with the financial capacity to enter into this very important transaction with R&B Falcon. The transaction fits our long-term businessplan. It expands our mobile offshore drilling fleet, enhances ourinfrastructure of assets, employee and customer relationships in all of our operating regions around the world and gives us exposure to the North American natural gas market. This combination of factors better positions us to address the growing and increasingly challenging offshore drilling needs of our customers, and thus will help us achieve our goal of being the drilling contractor of choice for customers, employees and investors."

Talbert added that following the transaction, Transocean Sedco Forex's consolidated debt to total capitalisation ratio is expected to be only 31 per cent, up slightly from 27 per cent at June 30, 2000.

Under the terms of the definitive agreement, unanimously approved by the board of directors of both companies, common stockholders of R&B Falcon will receive a fixed ratio of 0.5 shares of newly issued Transocean Sedco Forex ordinary shares for each R&BFalcon share, resulting in the distribution of an estimated 100 million shares.

Based on last Friday's Transocean Sedco Forex closing price, the newly issued shares would have a value of approximately $5.8 billion, which together with R&B Falcon's approximately $3.0 billion of debt, results in a total transaction value of an estimated $8.8 billion. The transaction will be accounted for using the purchase method of accounting and is expected to be tax-free to R&B Falcon shareholders.

Closing of the transaction is expected to occur by the end of the first quarter of 2001, subject to the approval of stockholders from both companies, certain regulatory approvals and other closing conditions. After the close, the combined company will becalled Transocean Sedco Forex Inc and will trade on the New York Stock Exchange under the symbol "RIG." Principal offices willremain in Houston, Texas, and the company will employ approximately 15,000 people worldwide.

Victor E Grijalva and J Michael Talbert will continue to serve as Transocean Sedco Forex's Chairman of the Board of Directors and President and Chief Executive Officer, respectively. No personnel changes are anticipated in other Transocean Sedco Forex senior management positions.

The company will seek shareholder approval to increase the board of directors from 12 to 13 members, which will be comprised of the 10 current members from Transocean Sedco Forex plus three new directors designated by R&B Falcon.

Simmons & Company International and Goldman Sachs & Co are serving as the financial advisors to Transocean Sedco Forex Inc. Morgan Stanley is serving as the financial advisor to R&B Falcon Corporation.

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