Aban Offshore may sell up to 30% stake in S’pore arm to raise $250m

MUMBAI: Aban Offshore is set to take over Sinvest in a $800-million open offer deal. Since June 2006, it had bought 40% stake in the company. Subsequently, when the company’s bankers, including ICICI Bank, purchased around 8% stake of Sinvest from the market, the Oslo exchange pulled up Aban and asked for reasons why it should not go for an open offer.

The trigger limit on the Olso bourse for open offers is 40%. Sources said that Aban is now ready for the open offer. Talks are at a final stage to raise around $250 million through PE investors/hedge funds by selling up to 25-30% stake in Aban Singapore.

Aban has the option to bring in mezzanine funding through a couple of hedge funds. The company is also said have approached a host of banks, including ICICI Bank to raise debt up to $550-600 million, said sources. The company had earlier raised around $550 million debt from various banks — UTI Bank, Bank of Baroda, Bank of India and Exim Bank — to fund the first part of acquisition.

Aban Offshore is now ramping up its global operations through some big-ticket international acquisitions and is routing it through the Singapore subsidiary. Two months ago, it unsuccessfully attempted to buy 52% stake in Apexindo Pratama Duta Tbk of Indonesia. Aban Offshore is also looking at listing the subsidiary, currently wholly-owned by the parent, in order to pay back debt. On October 2, Aban entered into a Total Return Swaps deal (TRS agreement) with Sinvest shares as the underlying instrument. Subsequently, on October 16, Aban’s wholly-owned subsidiary, Alban, announced a further TRS agreement with Sinvest shares.

TRS is a deal involving one party taking over the total financial exposure in an underlying share from the other party in return for interest payment. The two TRS agreements represented around 8% of Sinvest’s outstanding share capital, and Oslo exchange learnt that a corresponding number of shares were acquired by the counterparties as hedging shares. The exchange had raised queries, including the relationship between Aban and the counterparties to the agreements.

The Oslo exchange has almost concluded that the Aban’s TRS agreements have triggered a mandatory offer under the Securities Trading Act. Aban is believed to have appealed to the Stock Exchange Appeals Committee two weeks ago, and is expecting final verdict by mid-December. If it is concluded that Aban has to make a mandatory offer, the company has to announce one in four weeks, or reduce its shareholding to below the threshold 40%.

On July 10, 2006, ET had reported that Aban was in the process of raising around $400 million in one of the largest private equity deals in the country. All top PE investors including Temasek, Blackstone, Carlyle and Newbridge had held talks to pick up 20-25% equity stake in Aban Singapore. However, the deal could not be clinched since prospective investors felt that the pricing was high, especially when oil prices starting falling.