Swissco Holdings Limited a Singapore-based marine service provider for the offshore oil and gas industry, announced the proposed acquisition of Scott and English Energy Pte. Ltd. (“Scott and English”) for approximately S$285.0 million yesterday.
The Swissco has entered into a legally binding heads of agreement (“HOA”) with Double Dragon Energy Holdings Limited, which will form the broad basis of the definitive sale and purchase agreement to be entered into for the proposed acquisition of the entire issued and paid-up share capital in Scott and English.
Scott and English is in the business of owning and leasing mobile offshore drilling units and service rigs to support major oil and gas corporations in their exploration and production (“E&P”) activities.
It is helmed by industry veterans with many years of experience in the oil & gas industry , including Mr. Tan Fuh Gih and Mr. Tan Kim Seng. Scott and English is a whollyowned subsidiary of Double Dragon, which is majority-held by Kim Seng Holdings Pte. Ltd. (“KSH”). In connection with the Acquisition, the Company proposes to undertake a share consolidation of two Shares into one new Share.
The consideration of S$285.0 million is to be satisfied by the allotment and issuance of 452,380,952 Consolidated Shares in the capital of Swissco (“Consideration Shares”) at an issue price of S$0.630 per Consideration Share. Scott and English is valued at approximately S$289 million according to a valuation report dated 27 February 2014 issued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited commissioned by the Company.
An extraordinary general meeting will be convened at a later date to seek the approval of Swissco shareholders for the Acquisition. The Acquisition is also subject to the approval of SGX, as it is regarded as a very substantial acquisition under the rules of the SGX Listing Manual.
“Swissco currently owns and operates a fleet of offshore support vessels (“OSVs”). The Board of Directors of Swissco believes that the Acquisition will lead to a diversification of its fleet
business and represents an investment for long-term growth. This move upstream by the Group in the offshore oil and gas E&P sector is a step forward from the primarily OSVfocused business. The Group expects to obtain potential operational synergies and benefit from the stable and recurring income base arising from the Acquisition. In addition, the Acquisition will potentially increase the market capitalisation of the Group significantly and therefore widen its investor base. This will likely attract more extensive analyst coverage and lead to an overall increase in investor interest and trading liquidity,” Swissco said in a statement.
Commenting on the transaction,Alex Yeo, Chief Executive Officer of Swissco, said: “The Acquisition will combine the expertise, know-how and track record of a leading marine
service provider with the sourcing capabilities and industry connections of a fast-growing international rig owner in the offshore oil and gas industry . Riding on the robust momentum in the offshore oil and gas sector, the synergies between the two businesses will diversify the earnings base for the Company while providing it with stable, recurring income. Swissco will
now have opportunities to grow beyond its traditional OSV operations. More importantly, this development will enhance long-term value for our shareholders.”
Highlighting Scott and English’s background, Chua Wei Teck, Chief Executive Officer of Scott and English, said: “As an emerging player in the international offshore oil and gas sector , we are backed by industry veterans with illustrious track records. We have deep, extensive relationships with oil majors and possess strong knowledge and understanding of the sector. With these solid connections, we are able to rapidly source and acquire interests in quality assets.
“Within a short span of time, we were able to acquire and charter out offshore drilling and service rigs to national oil majors in key markets such as Latin America, where governmental reforms are driving an increase in exploration and production spending. We were also able to secure long-term bare-boat charter contracts, which last about five years on average, with these oil majors. We believe this is a testament to our strong relationships with these oil majors and our knowledge, as well as our ability to thrive in this sector.”
Scott and English intends to acquire additional rigs to fuel its future growth, either through majority ownership or through joint-venture partnerships with reputable companies.
Strategies and Future Plans
Given the continuing demand for energy, oil prices are expected to be sustained at a high level over the longer term. As National Oil Companies (“NOCs”) push forward with aggressive drilling programmes in deeper waters, rig demand remains strong in all major global markets and across different types of rigs.“We are in the midst of an upcycle for rigs with a construction boom and increased utilisationof rigs leading to favourable rates for such assets,”
Chua said. “Scott and English plans to tap into opportunities that provide generous returns in short pay-back periods.”
Scott and English’s growth plans include:
* Geographical diversification to reach out to more new markets and NOCs;
* Expansion through acquisitions of new rigs, either through majority ownership or through joint-venture partnerships with reputable companies;
* Strategic business expansion through mergers and acquisitions; and
* Diversification of business activities that would complement the existing business
Chua concluded: “We have achieved much in a short period and have big plans ahead of us. By building our network and knowledge, we are confident of capitalising on favourable industry trends to capture a bigger market share of the offshore oil and gas industry.”