Rowan's manufacturing business spin-off likely soon - Barclays

Thu Dec 9, 2010 2:02pm EST

* Business could be worth up to $1 bln - analyst

* Analyst values business at $6-$8/share * Land rig business worth about $2/share

Dec 9 (Reuters) - Drilling contractor Rowan Cos (RDC.N) may hive off its manufacturing business in the near term and it could be worth up to $1 billion, a Barclays Capital analyst said.

Rowan, seen as a potential acquisition target, needs to jettison its onshore drilling and the manufacturing businesses before it can attract bidders. [ID:nSGE68D0KQ]

The company first unveiled plans to spin off the manufacturing business two years back and said early this year that it was looking to sell its land rig business, which would leave it as a pure play offshore driller with some of the best jack-up rigs in the world.

The manufacturing business, LeTourneau Technologies, may be worth about $800 million to just under $1 billion, or $6-$8 per share, Barclays Capital analyst James West said.

He valued the company's land rig business at $250-$300 million, or about $2 per share, and sees North American drillers as potential buyers.

At an analyst meeting on Thursday, Rowan's Chief Financial Officer Bill Wells said the company was considering all options to maximize value, the brokerage said in a note.

Rowan, which went public in 1967, owns about half the world's top rigs, and more than half of them are less than 10 years old, against an industry average of about 20 years.

Analyst West valued each of the company's jack-up rigs at about $40 per share, but said the market valued each of them at about $29 per share.

Shares of Houston-based Rowan, with a market cap of about $4 billion, were up 2 percent at $32.43 Thursday afternoon on the New York Stock Exchange. They have outperformed the S&P Oil & Gas Drilling sector index .GSPOILD by more than 27 percent so far this year. (Reporting by Thyagaraju Adinarayan in Bangalore; Editing by Unnikrishnan Nair)

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