Tanjung Offshore to apply for six-month extension of HoA

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KUALA LUMPUR: Tanjung Offshore Bhd, which is en route for a proposed reverse takeover (RTO) offer, will ask for a six-month extension of the heads of agreement (HoA) signed with several parties, a source told The Edge Financial Daily. The parties were led by Paris-based offshore marine oil and gas (O&G) services outfit, Bourbon SA. He said Tanjung Offshore advisers are now planning to get the nod from the board of directors to seek the extension of the HoA.

“But it will not be easy to get the six-month extension without anything concrete,” he noted, adding that the extension should be from Oct 5 this year to April 5 next year, during which Tanjung Offshore would not be allowed to change its board composition or acquire assets without Bourbon’s consent. “Shareholders will see this as an act that would jeopardise the value of a listed firm.”

This is not the first time Tanjung Offshore is asking for an extension. On Sept 5, it managed to extend the HoA’s exclusivity period from Sept 5 to Oct 5 this year, “to enable the parties to continue to discuss the proposed transaction”, the group’s announcement dated Sept 5 to Bursa Malaysia read. It said Tanjung Offshore, Singaporean Farid Khan Kaim Khan and his business partners — Mower Tunggal Jaya PT, Megagold Indonesia PT, Zona Maju Mapan PT and their business partners — as well as Bourbon Far East Pte Ltd, have mutually agreed to extend the exclusivity period to Oct 5.

“They are delaying [the deal] because they don’t want to lose the deal. They would rather delay the transaction until the non-compete clause expires,” the source opined. 

The HoA, inked on June 5 this year, signifies the group’s re-entry into the offshore support vessel (OSV) segment, the very business it relinquished two years ago when it sold its marine service business, Tanjung Kapal Services Sdn Bhd (now Icon Offshore Bhd), to Ekuiti Nasional Bhd (Ekuinas) for RM220 million.

Tanjung Offshore’s proposed RTO requires Ekuinas’ consent to waive a non-compete clause that came about when the former sold its business to the latter.  The clause, which will expire in mid-2015, restricts Tanjung Offshore from competing in the same segment for three years. But as at last week, Ekuinas had not reverted to Tanjung Offshore, the source noted.

On the proposed RTO, the assets to be pumped into Tanjung Offshore include controlling or majority interests in six entities that collectively own 18 OSVs 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.

“Some due diligence work has been done [on the assets to be injected], but it has not gone deep enough,” said the source.

Tanjung Offshore’s board of directors could not be reached for comment at the time of writing.

The counter closed one sen lower at 55 sen yesterday, giving it a market capitalisation of RM204.54 million.

This article first appeared in The Edge Financial Daily, on October 2, 2014.