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    Deep Sea Supply acquires 22 newbuilding contracts

    News // March 16, 2006

    The Board of Directors of Deep Sea Supply (DESS) has announced that the company has entered into an agreement to acquire 22 shipbuilding contracts for a total consideration of US$394 million from Hemen Holding Ltd, a company controlled by John Fredriksen.

    The acquisition is subject to DESS raising the necessary financing and the approval of the ordinary general meeting to be held on March 31st 2006. Hemen will, through participation in a Private Placement, become the largest shareholder in DESS, holding an estimated 20-22 per cent of the outstanding share capital subsequent to the Private Placement.

    "Through this acquisition DESS will become one of the leading owner/operators of supply vessels on a global basis, and the acquisition is a significant first step towards a further industry consolidation," said DESS in a statement.

    The acquisition of the 22 shipbuilding contracts is in line with DESS' strategy of acquiring large and/or relatively new tonnage. The contracts acquired consist of two large AHTSs with 15,000bhp being built at the Jaya yard in Singapore to be delivered first half of 2007, eight PSVs of 3,250 dwt of the UT 755L design being built at the Cochin yard in India to be delivered in 2006-2008, and 12 AHTS vessels with 6,500bhp being built at the ABG yard in India to be delivered in 2006-2009.

    The US$394 million will be paid by a cash consideration of US$120 million to Hemen, and DESS assuming the remaining construction and project costs estimated to US$274 million.

    The acquisition is subject to financing and shareholders approval in the Annual General Meeting on March 31st 2006. The total newbuilding programme will be financed with a share issue of US$150-165 million, a subsequent share issue of up to US$5 million (directed to DESS shareholders not offered to participate in the Private Placement) and a bank facility of US$225 million from Fortis Bank.

    DESS has retained First Securities, Pareto Securities and Fortis as managers for the Private Placement.

    "We are satisfied that we have been able to secure this fleet of attractive new-buildings at a competitive price. This will make DESS a company of substantial size, giving us access to better deal flow and more opportunities, which suits our strategy well", said Olav Fjell, Chairman of Deep Sea Supply.

    "We are very pleased with an industrial solution with Deep Sea Supply for the fleet of 22 newbuildings. We preferred a solution with Deep Sea Supply where we could retain some of the upside in the supply market after the sale of the fleet. The company should be well positioned for further consolidation," said John Fredriksen.

    DESS will conduct a Private Placement of up to US$165 million directed to Hemen, larger existing shareholders and selected professional and institutional investors.


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