Fortune's offer values Scorpion at $791m

The Abu Dhabi-based private equity company is offering 80 kroner a share, Bermuda-based Scorpion said yesterday in a statement to the Oslo stock exchange. That's 37 per cent higher than yesterday's closing share price of 58.5 kroner.

Scorpion's fleet of new rigs makes it an attractive takeover target, analysts have said. Rigs are in scarce supply because surging crude prices have prompted oil companies to step up the search for new reserves. The company's biggest shareholder, Seadrill Ltd., will probably accept the bid, said Jan Magne Galaen, an analyst with First Securities in Oslo.

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"There's little likelihood we'll see a competitive bid,'' Galaen said by telephone yesterday. He said the offer is higher than his fair-value estimate of 73 kroner and is likely to succeed.

Jim Daatland, a Seadrill spokesman, declined to comment on whether the Norwegian oil-rig company will tender its shares or make a competing bid, in a telephone interview yesterday. Scorpion rose 34 per cent to 78.50 kroner in Oslo trading, the biggest percentage gain since its initial public offering in 2005.

Founded in 2005, Scorpion has a fleet of seven jack-up rigs, which have retractable legs that extend to the seafloor and are the most common type used for shallow-water drilling.

Two of the rigs have been delivered and the five under construction are due to be delivered by the end of next year.

"I think we'll see a lot of consolidation in the oil services industry in 2008,'' Galaen said. "There's a lot of cash flow out there and tempting takeover candidates with high-quality rigs.''

Fortune Super Equity Management is a global investment organisation structured as a private equity company. Fernley Funds and Simmons & Company International advised Scorpion.