Scomi Marine Bhd has proposed a sale of its assets to its Indonesian subsidiary PT Rig Tenders (PTRT) for US$171.8 million (RM550 million), an exercise that will leave the company principally as a cash-rich shell.
Apart from the cash, which translates to about 75 sen per share, the company will also have a stake of between 20.63% and 24.55% in the new-look PTRT which, according to the company’s announcement yesterday, is expected to have an enterprise value of US$246.3 million.
Scomi Marine was last traded at 43 sen. At the moment, it controls 80.54% of PTRT, which is listed on the Jakarta Stock Exchange with a market capitalisation of IDR365.48 billion (RM129 million).
Following the completion of the proposal, Scomi Marine will cease to control PTRT and in its place will emerge Portside Offshore Inc (POI), which is a privately owned and managed Indonesian fund.
Under the proposal, Scomi Marine which is a subsidiary of Scomi Group Bhd, entered into a heads of agreement (HoA) with PTRT and POI in relation to POI acquiring a significant stake in PTRT.
POI’s entry into PTRT will come via a rights issue to be undertaken by the latter. PTRT’s cash call will raise US$71.8 million to help fund its acquisition of assets from Scomi Marine. Scomi Marine will assign its portion of the rights to POI to facilitate its entry as a major shareholder in PTRT.
According to the announcement, the proposed disposals are expected to result in Scomi Marine realising a loss on disposal of about RM433 million (which is subject to change, the final amount of which will be determined on the completion date).
Scomi Marine also stated in the announcement that upon completion of the proposals, it may be classified as a cash company under the listing requirements.
“Nevertheless, the board will take into account the implications of Scomi Marine’s listing status in determining the proposed utilisation of proceeds arising from the proposed disposals. The board will consider various options including, but not limited to, acquiring a new business, injecting an existing business into Scomi Marine and/or entering into strategic alliances, to revive and reorganise the business,” the company stated.
The latest proposal involving PTRT is the second major asset disposal exercise that Scomi Marine had announced this year. In February, it announced the disposal of its 29.07% stake in CH Offshore Ltd, a Singapore-listed entity, to Falcon Energy Group Ltd for S$143.5 million (RM348.7 million) cash.
The exercise has been completed and Scomi Marine used the proceeds to pare down its debts from RM525.7 million to RM184.8 million.
In the latest exercise, Scomi Marine proposed to dispose of its 100% equity interest in CH Logistics Ltd (CHL), CH Ship Management Pte Ltd, Goldship Pte Ltd and Sea Master Pte Ltd, a wholly-owned subsidiary of CHL, to PTRT.
Scomi Marine will also hive off its 94.9% interest in Grundtvig Marine Pte Ltd to PTRT. The proposed sale is for US$171.8 million cash, of which US$100 million will be raised through bank borrowings and the rest through a rights issue.
Scomi Marine said the entry of a strategic investor in PTRT was essential in growing the businesses, both from a financial and operational perspective.
Mukhnizam Mahmud, president of Scomi Marine, said that in view of the operational and regulatory landscape, this corporate exercise was both strategic and timely.
“The marine logistics and offshore support vessel businesses in Indonesia have become increasingly challenging given the intensifying competition, changes to local regulations relating to ownership and cabotage as well as pressures on charter rates. In order to stay competitive, significant capital expenditure is required to replace vessels and tap opportunities in terms of opening up new markets.
“We recognise the need for a strategic investor that can play an integral role in growing our business. We are confident that together with POI, we will have the capability, capacity and global network required to take the significantly enlarged PTRT to greater heights of success,” said Mukhnizam.
Scomi Marine would continue to participate in the businesses’ upside potential through its equity interest in PTRT of up to 24.55% upon completion of the proposed exercise.
According to Mukhnizam, this exercise will see Scomi Marine reposition itself to become a well-capitalised marine logistics player that is equipped to tap growth opportunities in emerging markets.
“We have identified India as a primary target market with enormous demand and high growth opportunities,” he added.
“On the other hand, we are still bullish on the Indonesian market as its coal production sector is expected to expand, thus increasing the need for marine logistics services. Hence, this exercise will also enable Scomi Marine to tap into the growing demand for Indonesian national vessels as a result of the new cabotage laws that will be taking effect,” he said.
“All in all, remaining with our status quo is not an option. We have selected to dispose of our existing assets today so that we can participate and harvest greater rewards in a bigger, stronger entity in the forseeable future.”
This article appeared in The Edge Financial Daily, July 13, 2010.
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