KUALA LUMPUR: Tanjung Offshore Bhd may call off the proposed asset injection exercise that will result in a reverse takeover (RTO) by Paris-based Bourbon SA, according to sources.
The meltdown in Tanjung Offshore share price, plunging from a peak of 65 sen in June to 32 sen last Friday, has prompted the company’s executives to have second thoughts about the proposed RTO exercise.
“The deal doesn’t make sense anymore (in view of the current share price),” said a source.
The market value of Tanjung Offshore has halved in the past six months, and this would not augur well for the company as its assets are being valued substantially lower. In fact, the RTO was based on the share price of 70.8 sen — almost a 55% premium to the current market price.
It is learnt that a decision on the matter will be known as soon as next week. Tanjung Offshore will have a special board meeting today to discuss the proposed acquisition of Bourbon group of companies, a source said.
When contacted, its independent non-executive director Tan Sri Tan Kean Soon said he could not comment on the deal.
Bourbon has conducted a due diligence since the French offshore marine oil and gas services outfit has chosen Tanjung Offshore to be its RTO candidate in early June.
“Among other things [that might have delayed the progress], Ernst & Young (E&Y) reported that Gastec (Gas Generators (M) Sdn Bhd) was bought above valuation,” the source revealed.
On Oct 21, 2013, Tanjung Offshore entered into a share sale with Appolusa Sdn Bhd to acquire the remaining 49% equity interest or 2.35 million shares in Gastec for RM34.3 million cash.
Tanjung Offshore noted that the purchase price was arrived at on a willing-buyer-willing-seller basis. Gastec is involved in the manufacturing of gas generators for the industrial and oil and gas industries.
Under the proposed exercise, a slew of marine assets would be injected into Tanjung Offshore through an issuance of new shares at 70.8 sen each, which would eventually result in a RTO of the company by Bourbon SA.
The assets to be pumped into Tanjung Offshore include controlling or majority interests in six entities that collectively own 18 offshore support vessels and five anchor handling tug supply vessels.
In addition, a 51% stake in licensed ship manager Bourbon Offshore Mitra Sdn Bhd, a 100% stake in Bahtera Sri Kandi Sdn Bhd, a licensed contractor of Petroliam Nasional Bhd, and 100% equity interest in Bahtera Niaga Indonesia (Labuan) Ltd will be injected into Tanjung Offshore.
Notably, the RTO deal would require Tanjung Offshore to obtain Ekuiti Nasional Bhd’s (Ekuinas) consent to waive a non-compete clause that came about when the former sold its marine service business to the latter for RM220 million two years ago.
The clause, which will expire in mid-2015, restricts Tanjung Offshore from competing in the same segment for three years.
Because of the restriction, Tanjung Offshore had twice sought extensions of the signing of heads of agreement to June 30 next year.
In an announcement dated Oct 3 this year, Tanjung Offshore explained that the extension was “to facilitate the physical inspection and valuation exercise of the vessels to be acquired by Tanjung and the due diligence exercise”.
This article first appeared in The Edge Financial Daily, on December 29, 2014.