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Abu Dhabi, UAESaturday 15 December 2018

Maersk spins off drilling unit as it mulls exit from fossil fuels

The Danish company operates the world's biggest shipping line

Moeller-Maersk chief executive Soren Skou said "all options" were considered before opting to list the company's drilling business. Bloomberg
Moeller-Maersk chief executive Soren Skou said "all options" were considered before opting to list the company's drilling business. Bloomberg

Moller-Maersk has decided to list its drilling unit separately, marking its latest step toward a complete exit from the energy industry.

Copenhagen-based Maersk, which owns the world’s biggest shipping operations and is working on turning itself into a pure transport company, said on Friday that the decision will take effect sometime next year.

Maersk shares opened about 4 per cent higher in Copenhagen, topping Denmark’s benchmark index of the country’s most-traded stocks.

Chief executive Soren Skou said management had explored “all options” for the drilling unit before deciding to opt for a separate listing in the Danish capital. “We believe this will create the best value for our shareholders,” he said in an interview with Bloomberg Television’s Matthew Miller.

The 114-year-old firm has been planning an historic break with its conglomerate structure since the summer of 2016. Aside from turning its back on the oil and gas industry following the 2014 slump in prices, Maersk has also sold off shares in Danske Bank and exited a grocery business to focus exclusively on the container transport industry that it dominates.

The Maersk family’s holding company will initially own more than 40 per cent of the new listed drilling entity, and has “made a commitment” to continue as a major shareholder, Mr Skou said. The unit is worth about $4.4 billion, according to Bloomberg Intelligence analyst Talon Custer. Maersk cited a consensus view among analysts in February that the unit was valued at about $4.7bn back then.

Robert Maersk Uggla, the chief executive of the holding company said, “we welcome Moller-Maersk’s initiative to pursue a demerger of Maersk Drilling and, if concluded, Moller Holding looks forward to becoming a large shareholder.”

As part of the preparation for the new listing, debt financing of $1.5bn from a group of international banks has been secured for Maersk Drilling “to ensure a strong capital structure,” the company said.

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Bloomberg News reported late on Thursday that the deal was imminent, after Maersk decided that bids from potential buyers were too low. The company has given itself until the end of this year to exit all energy operations. In 2017, it agreed to sell its oil and gas business, as well as its tanker operations, for almost $10bn combined. Most of that money was in the form of shares from the Total deal.

The Danish company still has a supply-service unit that is marked for divestment. In February, Maersk cited a consensus estimate by analysts that those assets were worth about $600 million.

Claus Hemmingsen, who runs Maersk’s energy business, said the company hopes to communicate more details on the exact timing of the separate listing as soon as it knows more. As far as the supply business is concerned, he said “we don’t see a solution today.”

Maersk Drilling, which employs about 4,000 people, specialises in large rigs that can work in harsh environments. Its fleet includes about 15 jack-up rigs, four semi-submersibles and four drill-ships. Maersk took a $1.75bn impairment on the unit in November and reclassified it as “discontinued operations,” signalling a sale had moved closer.

The decision to seek a separate listing shows “there hasn’t been significant enough interest from buyers,” Per Hansen, an investment economist at Nordnet, said in an email. “On the other hand, it’s a good signal to ‘clean up’ instead of still having non-core assets lying around as leftovers.”

Maersk also said it sold a $1.2bn stake in Total last month, representing just over 19 million shares of the roughly 98 million that the Danish company received as part of the transaction.

Once Maersk Drilling becomes a separate company on the Nasdaq Copenhagen exchange, “a material part of the remaining Total shares” will be distributed to Maersk shareholders in the form of cash dividends, share buy-backs or as a distribution of the Total shares directly, the company said on Friday.