SINGAPORE (Jan 27): Falcon Energy Group has extended the deadline for its proposed acquisition of CH Offshore by two weeks to Feb 9 to give shareholders more time to think through its offer, which the takeover target's second-largest owner recently rejected.

"The offeror has considered the recent plunge in oil price, its impact on the outlook of the offshore and marine sector generally and the recent share price performance of other market players in the same industry as the company, and has decided to extend the closing date of the offer to give shareholders time to consider the offer amidst the current market conditions," Falcon said in a regulatory filing.

Falcon, the biggest shareholder in CH Offshore, offered 49.5 cents a share last month for the rest of the anchor handling tug supply vessel operator it did not already own, valuing the company at $349 million. As at Jan 26, the deal's original deadline, it had only 30.42% of CH Offshore, up from 29.1% before the offer was launched.

Chuan Hup Holdings, the second-largest investor in CH Offshore, turned down the offer on Jan 14 after Provenance Capital, which CH Offshore hired to advise it on the deal, said the terms were not reasonable. Chuan Hup, an investment holding firm, even bought shares in CH Offshore on the open market after rebuffing Falcon. It paid an average of 50.3474 cents a share, lifting its stake to 24.67% from 23.76%.

Falcon is unlikely to end up with control of CH Offshore without the blessing of Chuan Hup, which may be trying to goad the company to revise its bid by signalling that it was willing to pay a higher price on the open market for CH Offshore's shares.

On their part, CH Offshore's minority shareholders also appear to be holding out for a better deal. CH Offshore's share price barely budged after Chuan Hup rejected Falcon's bid, keeping within the 50-cent to 52.5-cent range it has been trading at ever since the offer was announced.

But with no certainty that Falcon will bump up its offer price, and with CH Offshore at risk of facing a drop in business in the near term as some of its vessels undergo mandatory overhaul, Chuan Hup and minority shareholders of CH Offshore may be taking a gamble. CH Offshore has already conceded that the sharp drop in oil prices has made the market for offshore support vessels more challenging, with charter rates expected to remain weak.

"CHO's revenue and profitability have been in the past adversely affected by vessel downtime and changes in charter arrangements from time to time," Voyage Research analyst Liu Jinshu wrote in a recent note.

"We see the combination of both companies under a larger entity as a positive," he said. "A larger entity with a bigger fleet will be able will be able to better rotate ship maintenance works to reduce the impact of vessel downtime or off-hire time on revenue and profitability."

At 49.5 cents, the offer price is more than CH Offshore's latest book value of 32.41 US cents a share, or 42.96 cents. "We may see some share price weakness if the offer were to lapse and no further offers were made by Falcon or any competing party," said Liu.