Prosafe plans Axis acquisitionsCompany News // November 11, 2016
Offshore accommodation provider Prosafe has entered into a letter of intent with Axis Offshore Pte Ltd for the potential acquisition of all outstanding shares in the single purpose companies Axis Nova Singapore Pte Ltd and Axis Vega Singapore Pte Ltd, and 25 per cent of the shares in Dan Swift Singapore Pte Ltd.
The consideration for the acquisition will be US$70 million (NKr 579.2 million) settled by Prosafe in kind, through the issuance of 585.8 million ordinary shares priced at NKr 0.30 per share, and a subordinated zero coupon convertible bond of NKr 403.4 million, convertible into 1,344.7 million shares at a conversion price of NKr 0.30 per share.
As Prosafe noted, the offshore accommodation vessels market is currently in a challenging situation with significant growth in supply combined with a recession in the oil and gas industry. Prosafe’s strategy is to take a leading role to improve the situation in the market through cost reductions on all levels, fleet renewal, scrapping of older units, conversion of vessels to alternative uses and strategic consolidation.
"Having followed the development of the Axis Nova and Axis Vega, which are built next to Prosafe’s own rigs at the same yard, Prosafe believes on that the contemplated transaction offers an attractive opportunity to acquire the two high specification, harsh environment semi-submersible newbuilds at low risk," the company said. "Prosafe considers the contemplated acquisition to be value enhancing from an industrial and financial point of view, and that it has limited risk since the transaction is further based on Axis Nova and Axis Vega coming with cancellation rights and refund bank guarantees of US$60 million. The refund guarantee can be claimed in the event that Prosafe chooses to not take delivery of the newbuilds due to weak market conditions, or otherwise. This will provide additional liquidity to the company in a downside scenario."
Following the transaction, Prosafe will have three accommodation vessels completed or nearing completion in what it described as "a preserved, strategic stacking mode" with Cosco Quidong Shipyard in China. The intention is to start negotiations with the yard and other parties to find a solution for the delivery, financing and operations of the units such that Prosafe can take delivery on attractive terms upon a market recovery. Assuming the transaction and this process is completed, Prosafe envisage scrapping additional accommodation vessels in the period ahead, in addition to the three units already scrapped in 2016.
The transaction would also see Prosafe enter into a management contract for Axis’ converted monohull Dan Swift (in addition to receiving the Dan Swift shares). Dan Swift vessel will thereafter be marketed under the Prosafe banner and operated and managed as part of the Prosafe fleet. Prosafe sees additional upside from the marketing and operation of the Dan Swift on a standalone basis or as a supplement to the company’s semis as the case may be, both from management earnings and the minority interest.
"Following the financial restructuring executed this summer, we announced Prosafe’s ambition to adjust the fleet to the market situation and taking the lead in consolidation. The efforts to complete this transaction represent a significant step in renewing its fleet and delivering on our strategic promises. We will continue to work hard to further enhance our fleet, reduce the operating cost and improve the commercial prospects of Prosafe through the ongoing reorganization and streamlining of our organization and operating model as well as engaging actively in initiatives for further growth," said Stig Christiansen, acting CEO at Prosafe.
"The addition of Axis Nova and Axis Vega to our fleet will reinforce our renewal and high grading programme. We look forward to further enhancing our relationship with Cosco Qidong and to work with their team to find an optimal solution for the preservation, marketing and eventual delivery and financing of the vessels. A shareholding in and management of Dan Swift will add flexibility to our offering and upside potential from the minority interest while also being in line with our ambitions of reorganizing our operating model into several strategic segments."