Canyon Partners Issues Statement Regarding ISS' Recommendation that Rowan Shareholders Vote Against Merger with Ensco plc

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Jan 14, 2019, 07:00 ET

LOS ANGELES, Jan. 14, 2019 /PRNewswire/ -- Canyon Capital Advisors LLC (together with certain of its affiliates, "Canyon"), the investment advisor to funds and accounts that hold over 8 million shares, or approximately 6.3%, of the outstanding ordinary shares of Rowan Companies plc ("Rowan" or the "Company") (NYSE: RDC), today issued the following statement welcoming the recommendation from Institutional Shareholder Services ("ISS") that shareholders vote against the proposed merger between Rowan and Ensco plc ("Ensco").

"We have previously urged Rowan's Board of Directors both publicly and directly to avoid the unnecessary value destruction for shareholders resulting from a flawed process to merge the Company with Ensco. The proposed merger fails to properly consider Rowan's superior asset base and its stronger and better capitalized balance sheet. We are pleased that ISS agrees with the views Canyon has expressed about the merger, which we believe significantly undervalues Rowan's contributions to the combined entity."

Key Quotes from the ISS Report

"…Rowan shareholders are being asked to take on more incremental risk than Ensco shareholders in this transaction, a fact that seems to erode the underpinnings for an MOE-type structure."
"… the dissident has presented a compelling argument that the current terms do not appropriately compensate RDC shareholders…"
"…Rowan shareholders are not being sufficiently compensated for taking on more incremental risk than Ensco, despite Rowan's contribution of a modern fleet and stronger balance sheet, which are essential to the creation and success of combined entity."
"Given the lack of a formal sales process, the potential conflict of interests during the negotiations, the lack of market evidence that the proposed ratio is fair to Rowan shareholders, and that the proposed merger seems less imperative for Rowan than for Ensco, support for the transaction is not warranted based on the current terms."

As Canyon outlined in a letter to Rowan's Board of Directors dated January 4, 2019, Canyon is pleased that ISS agreed with its assessment that the proposed merger:

Does not adequately account for disparities in the companies' operational risk profiles, increasing the risk to Rowan and its shareholders by tying the Company's success to Ensco's older fleet of midwater and deepwater offshore drilling rigs and increasing exposure to more volatile segments of the offshore drilling industry.
Does not adequately account for disparities in the companies' financial risk profiles, increasing the risk to Rowan and its shareholders by adding significant balance sheet leverage as a result of Ensco already carrying $5.2 billion in long-term debt, with significantly greater intermediate maturities than Rowan has, and having nearly $400 million less available cash and short-term investments than Rowan.
Is based on a valuation whereby Rowan's shareholders will receive 2.215 Ensco shares for each of their Rowan shares, which is wholly inadequate, representing no premium on the closing price of Rowan's shares the day before the transaction was announced and less than the also entirely inadequate 2.5 share exchange ratio Ensco had offered previously (which still did not fairly reflect Rowan's value). The lack of a premium for Rowan shareholders fails to compensate them for the vastly increased risk that Ensco brings to the combination.
Is the result of a flawed sales process. No comprehensive procedure appears to have been employed to test the market to determine the appropriateness of a sale and the best achievable price. Moreover the merger was approved by a Board of Directors collectively owning less than 1% of Rowan's shares and was negotiated by a CEO whose interests are not fully aligned with Rowan's shareholders'.

For the reasons discussed above and in Canyon's letter dated January 4, Canyon intends to vote AGAINST the proposed merger.

About Canyon Partners LLC
Founded and partner owned since 1990, Canyon employs a deep value, credit intensive approach across its investment platform. Canyon specializes in value-oriented special situation investments for endowments, foundations, pension funds, sovereign wealth funds, family offices and other institutional investors. The firm invests across a broad range of asset classes, including distressed loans, corporate bonds, convertible bonds, securitized assets, direct investments, real estate, arbitrage, and event-oriented equities. For more information visit: www.canyonpartners.com.

Cautionary Statement Regarding Forward-Looking Statements
All statements contained in this press release that are not clearly historical in nature or that necessarily depend on future events are "forward-looking statements," which are not guarantees of future performance or results, and the words "anticipate," "believe," "expect," "potential," "could," "opportunity," "estimate," "plan," and similar expressions are generally intended to identify forward-looking statements. The projected results and statements contained in this press release that are not historical facts are based on current expectations, speak only as of the date of this press release and involve risks that may cause the actual results to be materially different. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation as to future results. Canyon disclaims any obligation to update the information herein and reserves the right to change any of its opinions expressed herein at any time as it deems appropriate. Canyon has not sought or obtained consent from any third party to use any statements or information indicated herein as having been obtained or derived from statements made or published by third parties.

Media Contact:
Brian Schaffer
Prosek Partners
(646) 818-9229
[email protected]

SOURCE Canyon Partners LLC