AwilcoÆs majority shareholders, Awilco AS and Aweco Holding, have agreed to sell their 40.11% holding in the company to COSL at a price of NKr85 ($16.72) a share and precipitated a tender offer to minority shareholders of Awilco. The offer price represents a premium of 18.7% over the closing price of Awilco shares on the Oslo Bors on July 4, the last trading day before the announcement, and a premium of 42.4% over the closing price on May 29, the day Awilco confirmed it was in discussions with a third party interested in acquiring the firm.
The tender offer will be financed by COSL from internal resources and bank funding. Given AwilcoÆs assets, COSL anticipates no difficulties in raising debt and could even finance the deal at a one-to-one debt-to-equity ratio, say sources close to the deal, adding that it is too early to discuss the names of potential lenders. With ChinaÆs banks awash in liquidity and providing competitive interest rates to Chinese companies pursuing outbound M&A, COSL could well choose to refinance AwicloÆs entire debt at more favourable terms than currently negotiated.
The offer is conditional upon COSL cornering 90% of the outstanding shares of Awilco. As COSL has firm arrangements for 40.11%, it needs another 49.89%. If successful, COSL intends to delist Awilco from the Oslo Stock Exchange where it currently trades. But COSL has retained the flexibility to proceed with the acquisition subject to achieving a minimum shareholding of 66.67%.
Lehman Brothers and JPMorgan are acting as international financial advisers to COSL and China International Capital Corp is the financial advisor. COSL is receiving legal advice from Clifford Chance. Awilco is being advised by Fearnley Fonds and Pareto Securities.
Other names which had surfaced as potential buyers of Awilco include fellow Norwegian firm Seadrill and financial investors from the Middle East.
COSL is an integrated oilfield service company providing services to each phase of offshore oil and gas exploration, development and production. Its four core business segments are drilling services, well services, marine support and transportation services and geophysical services. It has been listed on the Hong Kong Stock Exchange since 2002. COSL is owned 55% by Chinese state-owned enterprise, China National Offshore Oil Corporation (CNOOC).
COSL currently operates 15 drilling rigs and a fleet in offshore China, including support vessels, oil and chemical tankers, seismic and survey vessels. It operates in North and South America, the Middle East, offshore Africa and offshore Europe.
Awilco is an international offshore drilling contractor which owns and operates five drilling rigs and two accommodation units. It is expected to have 13 rigs in operation by 2009. It currently operates in Australia, Norway, Vietnam, Saudi Arabia and the Mediterranean. COSL cited the ability to diversify into these markets and increase the share of revenue it derives from international operations as a driver of the deal. COSL also said it will benefit from access to international management expertise, advanced technology and operating experience of Awilco.
Awilco is on a high growth trajectory as it is still in the phase of commissioning facilities. It grew total assets from $1.2 billion at the end of calendar 2006 to $1.75 billion in 2007 and as at March 31, 2008 this number was already up to $1.98 billion. On the back of this growth in assets Awilco grew revenues and consequently Ebitda from $22 million for calendar 2006 to $93 million in 2007 and has already posted an Ebitda of $50 million in just the first quarter of the current calendar year.
The combination of COSL and Awilco creates the worldÆs eighth largest rig fleet, comprising 34 operated rigs (including rigs under construction).
Awilco shares were a top gainer on the Oslo Bors yesterday, closing at NKr82, up 15% and, as anticipated, moving towards the open offer price. COSL was suspended from trading pending the deal announcement yesterday morning and last traded at HK$13.36 ($1.71) a share.