Malaysian block trade

Partner cuts stake in Malaysia's SepuraKencana by close to 50%

John Fredriksen-controlled Seadrill raises $200 million from the sale of a 6% stake in Malaysian oil and gas services and solutions provider SepuraKencana.
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SepuraKencana provides the offshore oil and gas industry with services and solutions, including oil rigs (AFP)</div>
<div style="text-align: left;"> SepuraKencana provides the offshore oil and gas industry with services and solutions, including oil rigs (AFP)</div>

Seadrill, an offshore drilling company controlled by Norwegian shipping tycoon John Fredriksen, yesterday raised just over $200 million from the sale of almost half its stake in Malaysian oil and gas services and solutions provider SepuraKencana Petroleum.

SepuraKencana is the new entity formed from the merger of SepuraCrest Petroleum and Kencana Petroleum that was agreed in August last year. It began trading in its new form a couple of weeks ago, on May 17, at a price of M$2.30 per share and has been hovering in a narrow range just below that since then.

The sale was arranged by CIMB and completed through a block trade, showing that it is possible to get deals done in the current volatile market – a comfort perhaps to other potential sellers looking to reduce their exposure in various markets.

However, a closer look at the transaction shows that it wasn’t done as a traditional block trade with a term sheet distributed to a wide range of market participants. Rather, the bookrunner offered the shares to a limited group of institutional investors only and the crossing on the Malaysian stock exchange some 30 minutes before the close yesterday was preceded by a few days of discussions with the potential buyers – which in turn suggests that no transaction is an easy transaction at the moment and getting deals done does take some work.

Seadrill said in a press release that it sold 300 million shares, which represents about 6% of the company and just under half of Seadrill’s total stake. And a source confirmed that the shares were sold at a fixed price of M$2.12 per share. The price translated into a 3.6% discount to Tuesday’s closing price of M$2.20 and an even narrower 2.3% discount versus yesterday’s close of M$2.17. The book was built in private while the stock was still trading.

Demand was said to have been good among the investors who were offered shares, but the final number of buyers was very small. There was no information of whether the shares were bought by international or Malaysian investors.

Seadrill said the sale was in line with the company’s strategy to realise gains from its investment portfolio and use this money to fund future growth within its core drilling business, as well as to optimise its dividend capacity. As the book value of Seadrill’s entire stake in SepuraKencana was only $111 million at the end of the first quarter, the company stands to make a “material accounting gain” from the sale, it said.

Seadrill will remain one of the largest shareholders in SapuraKencana and said it is “fully committed to work together with [its] Malaysian partner in order to develop future joint venture business”.

“It is likely that part of the proceeds released from the sale of the shares will be used to equity finance future joint venture activities with particular focus on expanding the drilling activities in Varia Perdana,” it added, referring to a joint venture between the two firms that owns self-erecting tender rigs.

Following the sale, Seadrill will still own 319.5 million shares in SepuraKencana, which equals about 6.4% of the company.

Having started with the Varia Perdana joint venture, the partnership has over time developed to include a large ownership in SepuraCrest (which was converted into a stake in SepuraKencana as part of the merger) and a joint venture in the Brazilian offshore construction market that owns and operates three pipe laying support vessels.

In its statement, Seadrill said it is “particularly pleased with the way SepuraKencana has taken a leading role in the development of the offshore service industry in the Far East, and how this has been converted to profitable businesses to the benefit of shareholders”.

¬ Haymarket Media Limited. All rights reserved.
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