Great Offshore close on Scandinavian co for $500 mn
The move, which comes close on the heels of his takeover of GOL from his cousins a month ago, is aimed at making the company an international player in the offshore space.
By Anto T Joseph, TNN |
MUMBAI: Vijay Sheth-promoted Great Offshore (GOL) is close to taking over a Scandinavian offshore company for around $500 million. The move, which comes close on the heels of his takeover of GOL from his cousins a month ago, is aimed at making the company an international player in the offshore space.
The cross-border deal, being co-ordinated by Motilal Oswal, is expected to close in 2-3 weeks.
“It’s inappropriate to talk about it now,” Mr Sheth told ET, adding that his company had not taken any final decision on any acquisition. Sources close to the deal said the Scandinavian company owns two jack-up rigs and that GOL is in the final stages of due diligence. Great Offshore shares rose 0.41% to Rs 790.45 on BSE on Tuesday. The shares have lost 0.8% over the week and 4.7% over the month.
GOL was created by demerging the offshore division of Great Eastern Shipping Company (GE Shipping), India’s largest private shipping company, following a long family feud.
The GOL board, which met on July 30, discussed various fund-raising options ahead of the takeover. The sources said the boad has cleared a proposal to issue foreign currency convertible bonds (FCCBs) worth $40 million.
ADVERTISEMENT
GOL has also increased the FII investment limit from 24% to 49%. For this, the company could take the portfolio investment route or any other permissible mode. GOL recently issued 1.5 million redeemable optionally-convertible preference shares into equity at Rs 875 to the Exim Bank of India for about Rs 130 crore. A couple of weeks ago, the Carlyle group had picked up around 5% stake in GOL for around Rs 165 crore. The global offshore services sector has seen a boom, thanks to soaring oil prices and the expanding exploration and production budgets of the oil giants. High prices are luring oil companies into stepping up the search for oil and gas across the world’s oceans, thereby benefiting offshore supply companies.
In India, many local companies, including GE Shipping, Essar Shipping, Mercator Lines and Varun Shipping, are expanding their offshore/rig fleets to cash in on the boom. Charter rates of offshore/platform supply vessels and jack-up rigs have shot up over 100% in one year as demand largely outstripped supply.
The boom has led to a strong consolidation wave in the international market. For instance, last month, offshore drilling contractors, Transocean and GlobalSantaFe Corp, announced a mega merger to create a company with a full range of offshore drilling services.
ADVERTISEMENT
The estimated enterprise value of the combined company would be around $53 billion. Transocean, which is the world’s largest offshore drilling contractor, was formed in recent history through a merger of Sedco Forex and Transocean in 2000 while GlobalSantaFe is the successor to two companies, Global Marine and Santa Fe International, which merged in November 2001.For GOL, fleet expansion has been a top priority, as many contracts are waiting to be grabbed in India’s fast-growing gas/oil exploration sector. GOL recently bagged a major 5-year contract early July from the state-owned ONGC. The contract, which is slated to commence from May 2009, is valued at around Rs 1,000 crore.
A Mumbai-based analyst said GOL is cash-rich, and that it can easily leverage its balance sheet for the acquisition. “The company is sitting over Rs 500-600 crore cash reserves, and is creating over Rs 150 crore every quarter. Of the $500 million deal, a major share of around $420 million will be debt,” said sources.
Earlier, Chennai-based Aban Offshore had bought a Norwegian drilling company Sinvest, using a Singapore subsidiary. It paid $446 million initially for around 34% stake, and subsequently bought out 100% stake and got it delisted, by shelling out a total of $1.3 billion. The acquisition had helped Aban to join the top league of international offshore rig operators.
GOL managing director Vijay Sheth, who holds around 20% equity, has made it clear that the company will look at inorganic growth to make it a global operator. Other stakeholders — LIC, GIC and other mutual funds — hold around 7% stake.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
