Hanwha Ocean sweetens the takeover deal for Singaporean FPSO player by upping the final offer ante by 11.67%

South Korea’s shipbuilder Hanwha Ocean has thrown a boost of 11.67% into its final offer to shareholders of Singapore-based offshore builder Dyna-Mac, which specializes in manufacturing marine plant topside structures for floating production, storage, and offloading (FPSO) and floating liquefied natural gas (FLNG) units. This offer is said to have surpassed all previous closing share prices for the last ten years, thus, the Asian shipbuilder has no intention of raising it further.

Last month, Hanwha Ocean disclosed plans to make a voluntary conditional cash offer to secure management control of Dyna-Mac, after investing KRW 116 billion, or approximately $86.9 billion, in May 2024 to buy a 25.4% stake in the Singaporean firm. The initial offer announcement, made by the United Overseas Bank on behalf of the South Korean shipbuilder, proposed S$0.60, or around $0.46, in cash per share for all the issued and paid-up ordinary shares in the capital of Dyna-Mac, other than shares already owned, controlled, or agreed to be acquired by Hanwha.

However, after the largest shareholder of the Singapore FPSO firm, the Estate of its founder Desmond Lim Tze Jong, deemed the previous offer to be uncompelling believing it did not take into account the firm’s growth potential, Hanwha Ocean’s revised final offer price of S$0.67 or $0.51 for all the issued ordinary shares in the capital of Dyna-Mac is interpreted to show a boost of S$0.07 or $0.05, which is approximately an increase of 11.67% over the previous offer price of S$0.60 for each offer share.

“The final offer remains the one and only offer available for acceptance by shareholders to immediately realise their investment in the company at such notable premiums. No alternative proposal for the Company has been announced. In the event the offer is not successful, there is no assurance that the share price will remain at current prevailing levels or that shareholders will be able to monetise their shares at the final offer price,” explained Hanwha Ocean.

This final offer is perceived to represent a premium of 35.4% over the undisturbed last traded price on September 10, 2024, and premiums of 67.5%, 44.4%, 27.4%, and 18.6% over the 12-month, six-month, three-month, and one-month volume-weighted average prices (VWAPs), respectively.

As a result, Hanwha Ocean claims that this offer provides a viable exit alternative for investors who may want to avoid volatility and unpredictability due to the offshore plant industry’s inherent cyclicality. The South Korean shipbuilder underlines that its final offer price marks a premium of 584.4% over the Singapore player’s net asset value (NAV) of 9.79 cents as of June 30, 2024.

While there was a hiatus in large floating production orders in Q1 2024, the forecasts show global demand for these units is poised to grow, as illustrated by 83 FPSO orders being expected by 2030, enabling Hanwha to make more room for itself in this growing market with the acquisition of the Singapore player.

While explaining the rationale for the final offer, the Asian player explains that it comes at a critical time for the company, which operates in an offshore industry facing growing challenges in navigating the global energy transition. Hanwha Ocean also mentions rising international competition and energy price volatility that will continue to necessitate significant strategic investment in economies of scale, technological innovation, and operational capabilities in line with best practices to stay relevant.

The South Korean shipbuilder emphasized: “Against this uncertain and highly cyclical macro-economic backdrop, the offeror, as a financially disciplined and prudent long-term investor, has considered the value and growth prospects of the company, taking into account its financial performance, net cash position, and order book, as well as the potential benefits of its recent Exterran Offshore acquisition.

“Taking these factors into consideration, the offeror is of the view that the final offer price is reflective of the acquisition’s intrinsic value to the offeror and may consider other strategic options available to it should the offer not succeed at this juncture. With the offeror’s expanded ownership and support, it is envisioned that the company will have a greater opportunity to grow both within the Singapore energy market and beyond while maintaining its home-grown identity.”

Hanwha Ocean claims to be committed to leveraging its global scale to foster local market innovation and enhance the company’s reach as a multi-disciplinary contractor. The closing date of the offer is extended to November 6, 2024.