KUALA LUMPUR: Eversendai Corp Bhd founder and group managing director Tan Sri A.K. Nathan is proposing to inject its private entity Vahana Offshore Sdn Bhd which is involved in the liftboat business into the group.
Eversendai has received a letter of offer from Vahana Holdings Bhd for the proposes merger exercise, according to its filing with the stock exchange.
Vahana Offshore owns Aryan-Inspire Pte Ltd, Arjun-Inspire Pte Ltd and Vahana Marine Solutions DMCC.
The indicative purchase price will be finalised following negotiations between the parties subject to the completion of due diligence.
Nathan said the transaction will be done via the issuance of redeemable convertible preference shares to be converted at a later date. The merger is expected to be completed in 30 days.
In a media briefing today, Nathan said the merger presents the opportunity for Eversendai to acquire liftboat assets together with secured long-term charter contracts in the oil & gas industry.
He highlighted that Vahana Offshore is the first and only Malaysian company to own and operate a liftboat which is used for maintenance, work over, well service activities, hook-up, commissioning and decommissioning of offshore platforms.
“Liftboats are very popular and widely used in America, and subsequently they have caught on in Europe and the Middle East region. We foresee huge opportunities coming up in this sector, as the business is lucrative and profitable but the only challenge is that capital expenditure is very high,” he said.
However, he added that for this type of venture, once the expenses have been paid off, operating costs are typically low with high profit margins. For FY20 ending Dec 31, Nathan said the liftboat business will contribute about 20% to Eversendai’s earnings.
Vahana Offshore’s vessels are Vahana Aryan and Vahana Arjun, which cost US$102 million (RM422 million) and US$100 million respectively.
Presently, Vahana Aryan owns and operates a completed liftboat and had been carrying out projects in Saudi Arabia for Saudi Aramco over the last one-and-a-half years.
Vahana Arjun is still under construction and is currently 40% complete.
Both vessels have bagged five-year charter contracts, via Vahana Marine Solutions, which start in June 2020 and June 2021 respectively.
Nathan also pointed out that the merger would help rid the Eversendai Group of the related party aspect, as well as eradicating the loans Vahana has taken from sitting on Eversendai’s books.
“Overall, I think this is the best thing to do in the interest of the group. This a value add for Eversendai in terms of helping its share price and also improving its bottom line.
“Further, the proposed offer will enable Eversendai to build a recurrent income business segment and eliminate related party exposure,“ he said.
The merger is not expected to raise Eversendai’s gearing ratio, which is currently at 1.3 times. Nathan said there are plans to lower the ratio further within the next two to three years.
Meanwhile, Nathan said he is considering reducing his stake in the company in order to improve the stock’s liquidity and address the public shareholding spread.
