Yinson to buy Norway's Fred Olsen Production, become world No. 6 FPSO firm

KUALA LUMPUR: Yinson Holdings Bhd has proposed to buy Oslo, Norway-listed Fred Olsen Production ASA (FOP) for 9.40 Norwegian krone (RM5.20) per share, in a deal that would propel the company to No. 6 on the global floating production, storage and offloading vessel (FPSO) league table.

This puts it just one spot behind Bumi Armada Bhd, which currently has five such assets.

Yinson informed the stock exchange yesterday that the exercise would be conducted via a general offer for FOP’s shares. If it manages to secure 100% acceptance, then it would have to fork out RM551.34mil for the transaction. As at press time, FOP was being traded at 9.28 Norwegian krone (RM5.01).

FOP has three FPSOs, one of which is 50% owned with BW Offshore. All three vessels are on long-term charters with international oil companies in Nigeria and Gabon.

FOP also operates a mobile offshore production unit that services an oilfield in Antan, Nigeria alongside one of its FPSOs.

With the new assets, Yinson would hold equity in four FPSOs and one floating storage and offloading unit (FSO).

Yinson already has the support of FOP’s parent, First Olsen Ltd, which owns 61.54% of FOP, through an irrevocable and unconditional pre-acceptance of the takeover offer.

It plans to pay for the exercise via funds to be raised from two placements announced several weeks ago and bank borrowings, inflating its gearing level to 2.5 times and total borrowings to RM1.28bil.

Should Yinson get hold of 90% of the shares in FOP, it would carry out a compulsory acquisition of the remaining shares. The firm intends to delist FOP once it obtains a sufficient majority.

The exercise is to be completed by end-August.

Yinson also announced an amended and restated agreement on the placement of its shares to Datuk Mokhzani Mahathir-linked Kencana Capital Sdn Bhd.

The firm said it would issue 37.81 million new shares, or 14.64% of its enlarged capital spread, to Kencana Capital, raising RM106.62mil.

Given that Kencana Capital had a 4.54% interest in Yinson prior to the placement, its stake would increase to 18.52% following the exercise, the filing showed.

When contacted by StarBiz, Yinson chairman and managing director Lim Han Weng said the firm’s combined order book from its FPSO and FSO businesses post-acquisition would swell to US$2.35bil (RM7.36bil), inclusive of extensions.

 Yinson was also set to gain geographical exposure to Europe and Africa from its current bases in Vietnam, Indonesia and Malaysia, he added.

Lim, who founded Yinson as a transport services company, said it aimed to bid for upcoming FPSO jobs in Malaysia, Vietnam and the African continent, leveraging on FOP’s track record.

“There is pent-up demand globally from FPSO contracts that were not awarded over the past two years because of additional feasibility studies and other reasons. But many enquiries have cropped up.

“We expect to be a strong contender now and are targeting to bid for jobs around the world,” Lim said.

On the entry of Kencana Capital, of which Mokhzani is shareholder and director, he explained that its investment was separate from Mokhzani’s integrated oil and gas giant SapuraKencana Petroleum Bhd.

Analysts tracking Yinson reacted positively to its proposed purchase of FOP, saying the move helped reduce single client risk.

“Yinson would have one-third the earnings of Bumi Armada but only one less FPSO. Its stock should start to play catch-up due to the huge gap in valuations between Yinson and Bumi Armada,” a local bank-backed analyst told StarBiz.

Yinson, which closed last Friday at RM4.76, off its all-time high of RM4.95, resumes trading today.