Mermaid Marine Australia is looking to sell shares this week to help fund the A$550 million ($496 million) purchase of Singapore oil and gas marine service provider Jaya Holdings, which will almost double its vessel fleet.
The Australian oil and gas marine services provider began an accelerated bookbuild on Tuesday, and aims to raise A$317 million by selling a total of 132 million shares.
According to a term sheet, the offering comprises a A$217 million underwritten pro rata accelerated renounceable entitlement offer for existing shareholders and a A$100 million placement of new shares for institutions.
Trading in Mermaid Marine shares was halted on the Australian Stock Exchange and is set to resume at the start of business Friday, a person close to the deal told FinanceAsia on Tuesday.
The deal is expected to price Thursday night.
Eligible shareholders can invest in seven new shares for every 18 shares held as of Friday, 7pm Sydney time, at a fixed price of A$2.40 per share – a 12.9% discount to the February 24 closing price of A$2.70, the term sheet said.
The company expects to raise A$137 million from existing institutional shareholders and A$80 million from existing retail investors, who have until Wednesday night to take up the offer.
All of the company's directors intend to take up some or all of their share entitlements, Mermaid Marine said in a statement.
Mermaid Marine also aims to raise A$100 million by issuing 42 million new shares priced at no less than A$2.40 each to both new and existing institutions. The new shares will rank pari passu – or equally – with existing shares but will not receive any FY 2014 interim dividend, from March 11. The new shares will price late Thursday.
Appetite for the shares was strong among Australian institutional investors, said the person familiar with the deal, who expected significant demand from international long-only funds also because the Jaya acquisition was set to boost the company's profile globally.
"I'm expecting the core investors will be the big Australian institutions," the person said. "[But the acquisition] is quite encouraging for existing shareholders and will increase exposure. It's really going from an Australian story to a pan-Asian story."
Mermaid Marine has supply bases in Dampier and Broome, Western Australia, with a range of offshore vessels. With the Jaya acquisition it is set to inherit a further 27 vessels, bringing its total fleet to 61 ships. Mermaid Marine will also inherit two ship yards in Singapore and Indonesia and a new-build pipeline of six vessels, with three scheduled to be completed by early 2015.
"The acquisition provides increased geographic diversification for our vessel operations through the addition of a complementary vessel fleet which already has operations in markets across Southeast Asia and the Middle East," said Jeffrey Weber, Mermaid Marine managing director.
"Ownership of the two shipyards located in Asia will allow us to combine [the company's] existing marine technical expertise with [Jaya's] technical shipbuilding capability," he said.
Shares in Mermaid Marine are down about 16% so far this year.
The company reported its financial results for the half year to December 31 on Tuesday, posting net profits of A$24.2 million – a drop of 25% on the same prior year period, which it blamed on lower drilling activity and delays in vessel scope commencements.
Mermaid Marine expects the second half to be stronger than the first, highlighting a new drilling contract that starts February, delivery of a new vessel and a strong medium-term outlook for the region.
Morgan Stanley is the sole bookrunner on the deal.