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Pride International Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of offshore driller Pride International (NYSE: PDE  ) soared as much as 18% in intraday trading Monday on heavy trading volume.

So what: Fellow driller Ensco (NYSE: ESV  ) announced that it's buying Pride for $7.3 billion in cash and stock. Pride shareholders will receive 0.4778 shares of Ensco stock and $15.60 in cash for each share of Pride that they own. That initially valued Pride shares at $41.60, but the decline in Ensco's stock today has trimmed the premium a bit. The transaction will create the world's second largest offshore driller behind Transocean.

Now what: After the jump in Pride's stock and the dip in Ensco's, there's not much more room for Pride's shares to climb to reach the deal price. That doesn't necessarily mean that Pride shareholders should take their gains and ride off into the sunset, though. The combined company will throw around considerable weight in the industry, and Ensco sees at least $50 million in annual expense savings from the deal. That could make it worth Pride shareholders' while to hang onto the Ensco shares coming their way when the deal closes.

Want to keep up to date on these companies? Add Pride International to your watchlist. Add Ensco to your watchlist.

The Fool owns shares of Ensco and Transocean.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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Related Tickers

10/25/2016 4:00 PM
ESV $8.40 Down -0.24 -2.78%
Ensco CAPS Rating: *****
PDE.DL $0.00 Down +0.00 +0.00%
Pride Internationa… CAPS Rating: ****