SAPURA Telecommunications Bhd is strengthening its presence in the oil and gas sector with the purchase of a controlling 38.56% stake in Crest Petroleum Bhd from Renong Bhd for RM105mil cash, or RM3.60 a share.
The transaction will trigger a mandatory general offer (MGO), which Sapura will undertake for the remaining shares it does not already own. The transaction value will rise to RM273mil should there be a full take-up rate.
Prior to their suspension at mid-day yesterday, Crest shares jumped 27% or 69 sen to close at RM3.22. Sapura fell one sen to RM1.53, while Renong rose 0.5 sen to 45.5 sen.
Both Renong and Sapura officials said they felt the price of RM3.60 was fair. Based on the five-day weighted average market price of RM2.39, it was a 50% premium. But at yesterday's closing price of RM3.22, it was only 12%.
Sapura has the internal resources to undertake the transaction,'' said Nazir Razak, the managing director and chief executive officer of Commerce International Merchant Bankers Bhd (CIMB), the financial adviser to Sapura, which has RM280mil in its coffers.
With the acquisition, Sapura will now have two core businesses information technology and oil and gas. Sapura's first foray into the oil and gas business was in 1997 through the acquisition of Sapura Energy Sdn Bhd.
Sapura managing director Datuk Shahril Shamsuddin said the purchase of Crest offered Sapura the best vehicle to explore for oil and gas'' and enhance the Sapura group's position in Malaysia's oil and gas sector.
Under the 8th Malaysia plan (20012005) demand for petroleum products is expected to grow at an average 7.2% annually, and demand for gas at 9% per year. The local petroleum industry is seen investing about RM61.5bil over the Plan period.
Crest was established in 1979, with offshore oil and gas drilling being its core business. It is also involved in marine installation and construction and marine services.
It had contracts worth over RM600mil as at end-September 2002, which should last it two to three years. It is also the sole local player in its core business of offshore oil and gas drilling.
For Renong, executive vice-chairman Abdul Wahid Omar said, this represented a significant divestment and was part of the plans by United Engineers (M) Bhd (UEM) to divest unrelated businesses, as announced in 2001.
Wahid said Renong, which is under the UEM umbrella, would use the proceeds of RM105mil to redeem its SPV (special purpose vehicle) bonds and save RM10mil in annual interest payments. It is paying 9.6% interest on the bonds.
We are happy that we eventually found the right buyer (for Crest), and in terms of price, it is attractive enough for Renong to part with Crest, he said.
In a statement, Renong said the Crest shares were currently pledged as security for its RM8.2bil nominal value seven-year zero-coupon redeemable secured bonds due in 2006.
Although Crest may have the lead position in several sectors of the oil and gas industry, it reported poor results for the nine months ended Sept 30, 2002.
For the period, Crest reported a net loss of RM17.3mil, compared with a net profit of RM27.24mil in the previous corresponding period. Crest said the fall was due to decreased activities in the offshore construction and installation division as well as the completion of a contract by the offshore drilling division.
To a question on Sapura's decision to acquire Crest even though the company reported some losses, Shahril said he believed that Crest was a cash-positive company.
Recently, a bank had cancelled the unutilised portion of a US$35mil term-loan facility to the companys subsidiary, but it was sourcing alternative financing for the rig works.
The purchase by Sapura of the stake in Crest is expected to be completed in about six months.