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EXHIBIT (c)
FAIRNESS OPINION
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
October 17, 2000
Board of Directors
R&B Falcon Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079-2902
Members of the Board:
We understand that R&B Falcon Corporation ("R&B Falcon" or the "Company")
will commence a tender offer (the "Offer") to purchase, on the terms set forth
in the form of the draft Offer to Purchase dated October 12, 2000 (the "Offer to
Purchase"), all outstanding shares of 13.875% Senior Cumulative Redeemable
Preferred Stock, liquidation preference $1,000 per share (the "Preferred
Stock"), issued by the Company April 22, 1999. Pursuant to the Offer to
Purchase, the Offer will be at a price of $1,300 per share of Preferred Stock,
net to the seller in cash (the "Offer Price"). We also note that the Offer is
being made in connection with, but is not contingent upon, the merger (the
"Merger") of R&B Falcon with an indirect subsidiary of Transocean Sedco Forex
Inc. ("Transocean") pursuant to the Agreement and Plan of Merger dated August
19, 2000 (the "Merger Agreement"). Pursuant to the Merger R&B Falcon will, among
other things, become a subsidiary of Transocean. The terms and conditions of the
Merger and the Offer are more fully set forth in the Merger Agreement and the
Offer to Purchase, respectively.
You have asked for our opinion as to whether the Offer Price to be received
by the holders of shares of Preferred Stock pursuant to the Offer is fair from a
financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of R&B Falcon and Transocean, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning R&B Falcon and
Transocean prepared by the managements of R&B Falcon and
Transocean, respectively;
(iii) reviewed certain financial forecasts prepared by the
managements of R&B Falcon and Transocean, respectively;
(iv) discussed the past and current operations and financial
condition and the prospects of R&B Falcon and Transocean,
including information relating to certain strategic, financial
and operational benefits anticipated from the Merger, with
senior executives of R&B Falcon and Transocean, respectively;
(v) reviewed the pro forma impact of the Offer and its financing on
R&B Falcon's earnings per share, cash flow, consolidated
capitalization and financial ratios;
(vi) reviewed the trading activity and prices for the Preferred
Stock;
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MORGAN STANLEY DEAN WITTER
(vii) compared the financial performance and credit ratings of R&B
Falcon and Transocean and the prices and trading activity of
the Preferred Stock with those of certain other publicly-traded
companies, comparable with R&B Falcon and Transocean,
respectively, and their securities;
(viii) discussed the strategic and financial considerations for the
Offer with the management and Board of Directors of R&B Falcon;
(ix) participated in discussions and negotiations among
representatives of R&B Falcon and Transocean and their
financial and legal advisors;
(x) reviewed the Merger Agreement and certain related documents;
(xi) reviewed the Certificate of Designation relating to the
Preferred Stock and the draft Offer to Purchase;
(xii) reviewed the past, current and anticipated financial returns of
the Preferred Stock;
(xiii) reviewed the financial terms, to the extent publicly available,
of certain comparable tender offers to purchase securities
deemed relevant; and
(xiv) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial forecasts, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of R&B Falcon and Transocean, respectively. We have
not made any independent valuation or appraisal of the assets or liabilities of
R&B Falcon or Transocean; nor have we been furnished with any such appraisals.
In addition, we have assumed that the Merger and the Offer, if consummated, will
be consummated in accordance with the terms set forth in the Merger Agreement
and the draft Offer to Purchase, including that the Merger will be treated as a
tax-free reorganization pursuant to the Internal Revenue Code of 1986, as
amended. Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and in connection with the Merger, including
providing a fairness opinion to the Board of Directors of the Company in
connection with the Merger, and will receive a fee for our services for each
transaction. In the past, Morgan Stanley & Co. Incorporated and its affiliates
have provided financial advisory services for the Company and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing of a proxy or registration statement made by R&B Falcon with the
Securities and Exchange Commission in connection with the Offer.
We are expressing no opinion herein as to the prices at which the Preferred
Stock will trade at any time. This opinion does not address the fairness of the
Merger or the relative fairness of the consideration to be received by holders
of Preferred Stock or R&B Falcon common stock in the Offer and the Merger,
respectively. In addition, Morgan Stanley expresses no opinion or recommendation
as to how the holders of Preferred Stock should act with regard to the Offer or
as to how the holders of R&B Falcon Common Stock should vote at the
stockholders' meeting held in connection with the Merger.
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MORGAN STANLEY DEAN WITTER
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Offer Price to be received by the holders of shares of Preferred
Stock pursuant to the Offer is fair from a financial point of view to such
holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
