Perisai Petroleum Teknologi Bhd yesterday provided more details of its proposed acquisition of Garuda Energy (L) Ltd, a deal that has drawn a lot of interest due to the seemingly related-party nature of it.
In a reply to queries from Bursa Malaysia, Perisai revealed that if it acquired Garuda Energy, it would assume a debt of RM120mil of the latter. Analysts had earlier said it was difficult to ascertain if Perisai was paying a fair price for Garuda Energy, considering there were no details on the latter's debt levels.
Perisai also said its total borrowings would balloon from RM251.2mil as at Dec 21, 2009 to RM600.4mil post-acquisition of Garuda Energy. Aside from the RM150mil debt at Garuda Energy, Perisai said it may raise another RM150mil via external borrowings to fund the cash consideration needed for buying Garuda Energy.
The projected total borrowings also include a consolidation of borrowings of RM91.4mil from its January 2011 acquisition of another company, Intan Offshore Group.
Bursa had also asked Perisai to clarify if the deal is a related-party transaction (RPT), “in view of the interest of Datuk Mohamed Ariffin Aton in the proposed acquisition”.
To this, Perisai said that since Mohamed Ariffin was only a director of Gryphon Energy (M) Sdn Bhd, the deal was not considered a RPT.
To recap, on Tuesday, Perisai said it was acquiring Garuda Energy from Nagendran Nadarajah for a total of RM212mil, to be paid for in cash and shares. Nagendran, a co-founder of Perisai, will end up with 11% in Perisai, having just exited the company last April when he sold his 19% stake to Singapore-listed Ezra Holdings Ltd.
At the time of Nagendran's exit from Perisai last year, he had acquired Garuda from Perisai for only US$5mil.
According to Perisai's statement on Tuesday, Garuda will be chartering its mobile offshore production unit (MOPU) to Gryphon, which had recently been awarded a contract by a major oil and gas company to “lease, operate and maintain a MOPU for a period of 2+1+1 years”.
Another query from Bursa was for Perisai to provide the basis of its board's recommendation to grant approval for Perisai to enter into an agreement with Nagendran, considering that Perisai's board had, in May 2010, opined that the disposal of Garuda to Nagendran “was in the best interest of Perisai”.
Perisai's reply to this was to give a brief description of Garuda Energy. It said that Garuda Energy was made up of “an old jack-up rig” when it was disposed to Nagendran in 2010. “The rig then was without any contract and, furthermore, Perisai did not intend to take on any construction risk to rebuild it into a MOPU; hence, Perisai had decided to dispose of the rig in 2010,” it said.
It added: “The company, which Perisai is now buying, will own a MOPU that is expected to have a certified 15-year life span”.
In addition, one of the conditions precedent to the completion of the deal “is the receipt of the charter payment from the major oil company”.
Perisai also said that the total cost for building the MOPU was US$60mil to US$70mil.
Meanwhile, Perisai managing director Zainol Izzet Mohamed Ishak told StarBiz that it had so far only entered into a term sheet with Nagendran.
“The reason why we made the announcement is because we did not want speculation on our share price while we were starting to talk (with Nagendran). So we carved out some basic terms while we pursue due diligence,” he said. - By RISEN JAYASEELAN of risen@thestar.com.my
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