YINSON HOLDINGS BHD’S RM551.3 million cross-border acquisition of Norway-listed Fred Olsen Production ASA (FOP) propelled the transport-oriented outfit into the sixth largest player in the floating production, storage and offloading (FPSO) vessel segment of the global oil and gas (O&G) industry.

With five FPSO vessels in hand following the purchase, Yinson is now just one spot behind Bumi Armada Bhd, which is fifth on the global ranking with seven FPSO vessels.

Capitalising on the Norwegian company’s track record and management skills, Yinson is also well positioned to be a global FPSO operator and is a strong contender for jobs overseas. It is now looking to bid for such jobs.

Since the completion of the acquisition in January, the Malaysian integrated offshore service provider has seen favourable investor interest.

The stock climbed to an all-time high of RM3.47 on Sept 15. However, as seen in other O&G companies, the sliding oil prices inevitably pulled down Yinson’s share price to last Tuesday’s close of RM2.50, giving it a market capitalisation of RM2.55 billion. Nevertheless, the stock has still gained 18.7% year to date, despite the current market rout.

With the addition of FOP, Yinson’s shareholder value and cash flow also increased significantly. For its first financial quarter ended June 30, 2014, net profit almost doubled to

RM31 million from RM16 million, while revenue increased to RM294 million from RM228 million previously.

Furthermore, its associate, Yinson Energy Sdn Bhd, was awarded three licences by Petroliam Nasional Bhd, allowing it to tender for future projects offered by the national oil firm.

Yinson is now embarking on a growth strategy. It wants to be more actively involved in the Gulf of Mexico and to enhance its presence in West Africa and Asia, where several of its vessels are currently based.

To recap, the acquisition of FOP was done via a conditional takeover offer by Yinson through a general offer for FOP’s shares. AmInvestment Bank was the main adviser of the exercise.

FOP is listed on the Oslo Stock Exchange and has been active in the offshore O&G production business since 1994. It owns and operates three ships for O&G production at offshore fields.

Yinson, whose subsidiaries provide offshore, supply and logistics services to oil companies in Southeast Asia, offered NOK9.40 per share (equivalent to RM5.20), which valued FOP at NOK996 million (RM551.3 million). The board of FOP had endorsed the offer, which was 5% higher than the stock’s market price at the time.

FOP says in a statement that “having carefully reviewed and evaluated the terms and conditions of this offer, including all of FOP’s strategic alternatives, the board has, with due consideration for possible conflicts of interest, unanimously concluded that an acceptance of the offer is in the best interests of FOP and its shareholders”.

It is worth noting that the funds for the acquisition of FOP were raised from bank borrowings and share placements, notably the sale of a 14.64% stake to high-profile investor Tan Sri Mokhzani Mahathir’s private vehicle, Kencana Capital Sdn Bhd. Given that Kencana Capital had 4.54% equity interest in Yinson prior to the placement, its stake increased to 18.52% following the exercise, making it one of the major shareholders in Yinson, apart from executive chairman Lim Han Weng.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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