Bumi Armada and MISC mulling over potential merger to consolidate floating production businesses

Malaysia’s Bumi Armada is pondering a business combination with the offshore segment of the compatriot shipping giant MISC Berhad (MISC), an owner and operator of offshore floating and energy-related maritime solutions and services.

Bumi Armada confirmed its entrance into a non-binding memorandum of understanding (MoU) with MISC on November 14, elaborating that the inked MoU would enable it to explore a prospective merger with the latter’s offshore business via an all-share transaction.

The confirmation of the duo’s contemplation of a potential merger comes after the rumor mill went into overdrive with suggestions that the pair might consolidate their assets to strengthen their position in the offshore floating production segment. 

The MoU is effective for nine months from the signed date, until the execution of the definitive agreement or termination of the MoU, whichever happens sooner, unless the duo makes other arrangements. The MOU is said to have no legal and binding effect, aside from certain clauses relating to, among others, exclusivity and confidentiality.

According to Bumi Armada, the merger will establish a player among the “leading floating production businesses globally with the scale, resources and financial capacity to compete in the growing and capital intensive offshore floating production segment.”

In addition, the firm underlines that the proposed business combination will create a Malaysian-based sector-focused entity that leverages “the combined talent pool, project development and engineering capability, and know-how of both MISC’s offshore business and Bumi Armada.”

Following the pause in large floating production orders in Q1 2024, predictions indicate that the global demand for these units will be on to rise, forecasting 83 floating production, storage, and offloading (FPSO) orders by 2030. Therefore, if Bumi Armada and MISC agree to combine their assets, the acquisition would allow the duo to boost their exposure in the growing market.

After further assessment and completion of due diligence, the two companies may agree to proceed with the proposed merger and enter into negotiations on the definitive agreement. However, Bumi Armada underlines that there is no certainty that the MoU will lead to the completion of the proposed merger.

Recently, the company’s wholly-owned subsidiary, Armada TGT (ATL) secured a two-year firm period extension for the FPSO Armada TGT1 via the execution of a bareboat charter contract amendment (BCC) addendum with Hoang Long Joint Operating Company (HLJOC) for the Te Giac Trang (TGT) field located offshore Vietnam.

The extension began on November 15, 2024, and will expire on December 7, 2026. The aggregate contract value is approximately $74.4 million. Since starting operations at the TGT project, the FPSO Armada TGT1 is said to have delivered excellent operating performance with zero lost time incidents and an average oil and gas uptime above 98%.

MISC has also been busy lately. In September 2024, the firm made arrangements with SBM Offshore to exchange ownership interests for two FPSOs. Before this, the Malaysian giant also unveiled a type of floating unit it described as the world’s first future-ready newbuild floating production storage and offloading (NBFPSO) vessel in May 2024.

Alongside multiple other business opportunities, the firm is actively pursuing, it also inked a new deal with Petronas CCS Ventures and Japan’s shipping major Mitsui O.S.K Lines (MOL) to establish a joint venture company to acquire and own liquified carbon dioxide (LCO2) carriers.