Prosafe SE

M&A Activity • Jun 3, 2019

Prosafe SE: Prosafe and Floatel seek merger in challenging and changing market

Prosafe SE: Prosafe and Floatel seek merger in challenging and changing market

Prosafe SE ("Prosafe", Oslo Stock Exchange ticker PRS) and Floatel International

Ltd ("Floatel") have today signed an agreement to merge their respective

businesses. The aim is to create a more robust company with improved services

and geographical presence, able to sustain a prolonged cyclical downturn and

challenging markets for offshore accommodation.

Prosafe SE, Stavanger, is a leading owner and operator of semi-submersible

accommodation vessels (flotels) listed on the Oslo Stock Exchange, and, like

Floatel International Ltd, Bermuda, delivers offshore accommodation to clients

in the oil and gas industry worldwide. In a merger of equals, Prosafe will

acquire Floatel with consideration in Prosafe shares, whereby Floatel's

principal shareholders will become large shareholders in Prosafe.

- The need for consolidation in oil services is well known. We consider this

transaction not only strategically sound, but also necessary to adapt to the

significant changes in our markets and competitive landscape in recent years,

says Glen Ole Rødland, chairman of the board at Prosafe SE.

A merged company will have the most modern and flexible fleet in the global

market, with lower costs, increased geographical presence and a strengthened

customer offering.

If all conditions are met, including clearances from competition authorities in

Norway and the UK, required consents from its creditors and shareholder

approvals, the transaction is expected to be completed in the third quarter of

Reduced activity, increased competition

Driving the motivation to merge are the fundamental and lasting changes in the

market for offshore accommodation vessels in the wake of the oil price drop in

2014. Lower activity in exploration, production and maintenance, combined with

extensive efficiency improvements among the oil companies has led to

significantly intensified competition for "beds at sea".

- 2014 was a paradigm shift that triggered an unprecedented downturn and lasting

changes in the oil industry. We also face far tougher competition than before,

due to a considerable overcapacity of both drilling rigs and supply vessels that

are now being used as temporary accommodation. This situation is expected to

continue, says Rødland.

- A combination of Prosafe and Floatel will also be able to offer a better

product to the customers, through a more flexible and geographically diversified

fleet. We will to a greater extent offer the right capacity at the right time in

all central regions for offshore oil and gas, says Rødland.

A large and versatile fleet

Prosafe owns and operates a total of nine vessels, each with a capacity of

300-500 beds, and has options for delivery of two newbuilds over the next five

years. Floatel's fleet counts five units, each with capacity of 440-550 beds.

A merged company will at the outset have the bulk of its activity in the North

Sea and Brazil. Prosafe's current contracts on the Norwegian continental shelf

expire during the first half of 2019, while Floatel's contracts in the same

region expire in Q3 2020 including options.

Rødland emphasizes that the main point of the transaction is to create a company

that is better equipped to compete in the global market, especially in less

mature regions where demand for flotels is still growing.

Audiocast

An audiocast will be held at 10am CEST on Tuesday 4(th) of June 2019 where the

transaction will be presented by Peter Jacobsson, Glen Rødland and Jesper Kragh

Andersen. The audiocast can be followed live by clicking on the webcast link on

the front page of www.prosafe.com (http://www.prosafe.com/) or www.floatel.bm

(http://www.floatel.bm/)

Stavanger*()), 3 June 2019

Prosafe SE

For further questions, please contact:

Glen Ole Rødland, Chairman of Prosafe: + 47 907 41 662

Peter Jacobsson, CEO of Floatel: +46 768 56 3618

Jesper Kragh Andresen, CEO of Prosafe: +47 51 64 25 00 / +47 907 65 155

*()) Prosafe SE is in process of moving its legal domiciliation to Norway (head-

office in Stavanger) prior to the consummation of this transaction.

*****

Key transaction highlights include:

* The merger will create the world's largest offshore accommodation company,

combining Prosafe's existing nine semi-submersible vessels and options for

two newbuild semi-submersible vessels with Floatel's five semi-submersible

vessels.

* The combined company will be positioned to take advantage of further

operational efficiencies as well as enhanced global reach from an enlarged

fleet. The combined entity will be better positioned to sustain a prolonged

cyclical downturn, with challenging market outlook and falling utilization

and reduced hook up and commissioning work.

* For the year ended 31 December 2018, the combined company had revenues of

more than USD 600m and an EBITDA of more than USD 300m.

* The combined entity is anticipated to realize significant cost and

efficiency synergies.

* Combined firm contract backlog at 31 March 2019 is approximately USD 225m.

In addition, Prosafe recently announced a three-year contract for the Safe

Eurus in Brazil which adds about USD 80m to the contract backlog, while

Floatel has recently been awarded a 4-month extension at Martin Linge which

adds a further USD 22m to the contract backlog.

* The transaction is an all-share merger of equals and will be implemented

through issuance of new shares in Prosafe as consideration for all ordinary

shares in Floatel. After completion, Prosafe and Floatel shareholders will,

on a fully diluted basis (including Prosafe convertible bonds and Prosafe

warrants), own 55% and 45% of the combined company's equity, respectively.

* The name of the combined company will be Prosafe SE, and the shares of the

combined company will continue to be listed on the Oslo Stock Exchange under

ticker code PRS.

* The transaction is unanimously supported and recommended by the board of

directors of the two companies.

Transaction details

Pursuant to the transaction agreement, the transaction will be structured as a

transfer of 100% of the ordinary shares and management warrants in Floatel to

Prosafe, against consideration to the shareholders in Floatel in the form of

79,991,178 new shares (the "Consideration Shares") to be issued by Prosafe. The

number of Consideration Shares is based on an agreed exchange ratio of 55/45

(Prosafe/Floatel) on a fully diluted basis and includes 2,017,469 warrants to be

issued to the management of Floatel as replacement of existing management

warrants in Floatel. Total number of ordinary outstanding shares in Prosafe

following the transaction will be 159,837,921, and the total number of shares on

a fully diluted basis will be 177,758,173. No agreements have or will be entered

into in connection with the transaction for the benefit of the board of

directors of either company.

In addition, the Floatel shareholders will be allocated new non-voting, non-

interest bearing conditional preference shares. The conditional preference

shares shall entitle the holders to have a preferential right to receive

dividends, up to a total maximum value of USD 20m and such dividend may be

adjusted downwards to a minimum value of USD nil depending on the outcome of the

Westcon case.  These preference shares will be cancelled once the Westcon case

is concluded and any dividend has been paid.

The combined company's largest shareholders will be FELS Offshore Pte. Ltd.,

funds managed by Oaktree Capital Management, L.P. ("Oaktree") and HitecVision,

which, respectively, will hold approximately 22%, 19% and 16% of the shares on a

fully diluted basis. Post completion, these shareholders have agreed to a 12-

month lock-up of their shares.

The transaction will imply a business combination between Prosafe and Floatel,

with Prosafe after completion of the transaction remaining listed on the Oslo

Stock Exchange. The transaction will not trigger a mandatory offer pursuant to

the Norwegian take-over rules.

The companies will seek required consents from their creditors to the business

combination. No material amendments are intended to be requested from the

respective creditor groups other than what is required to effectuate the

combination. As such the current financing structure for both companies will be

kept intact and separate. The creditor process will be carried out based on the

principle of equal treatment between the Prosafe creditors and the Floatel

creditors.

Therefore, the transaction will be carried out so that Prosafe will remain as

the listed group holding company for Floatel and Prosafe.  To provide for such

structure, a demerger of certain Prosafe assets will be carried out to a newly

incorporated and wholly owned subsidiary of Prosafe.  The new subsidiary will,

inter alia, accede as debtor under the existing Prosafe debt. Existing secured

creditors in Prosafe and Floatel will continue with the same security structure

as they have today. In addition, Prosafe SE, being the ultimate holding company,

will be co-borrower for all existing secured debt in Prosafe and Floatel.

The companies firmly believe that the positive effects of the merger described

above also will benefit the creditors of the combined entity.

Board of Directors

It has been agreed that Glen Ole Rødland, Chairman of Prosafe SE, will become

chairman of the combined company. FELS Offshore Pte. Ltd. and Oaktree will

nominate one board member each.

Timing and conditions precedent

Completion of the transaction remains subject to certain conditions, including:

1. Approval by the shareholders of Prosafe by 2/3 majority at an extraordinary

general meeting in the company expected to be held later in 2019;

2. Approval from applicable competition authorities;

3. Approvals as required under all material agreements of the companies,

including creditor approval under both companies' financing arrangements;

4. No material adverse effect with respect to the respective businesses having

occurred.

Subject to completion of all conditions precedent, the parties expect that the

transaction will complete by end Q3 2019. The transaction is subject to a long

stop date of 31 December 2019.

*****

About Prosafe

Prosafe is a leading owner and operator of semi-submersible accommodation

vessels. The company is listed on the Oslo Stock Exchange with ticker code PRS.

For more information, please refer to https://www.prosafe.com/

About Floatel

Floatel International owns and operates five semisubmersible accommodation

vessels, all vessel where delivered within the period 2010 to 2016.  Floatel has

two bond issuances listed on Oslo ABM with ticker code FLOAT02 and FLOAT03. For

more information, please refer to http://www.

(http://www.prosafe.com/)floatel.bm

*****

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5-12 the Norwegian Securities Trading Act