Aban Offshore to acquire remaining stake of Norwegian company Sinvest for $800 mn

Chennai-based drilling rig operator Aban Offshore Limited has offered to acquire Norwegian drilling company Sinvest with an open offer of $800 mn on Oslo Stock Exchange. Aban holds around 39% of Sinvest’s equity. In June 2006, AOL had bought 33.76% stake in Sinvest for $446 mn in one of the largest cross-border acquisitions by an Indian company, through its Singapore subsidiary, Aban Singapore. Subsequently, the company had raised the stake by an additional purchase of 5.4% from the market. This had cost Aban around $82 mn, to make the total at $528 mn. The threshold limit for making an open offer is 40% under the Norwegian exchange.

The total deal size is expected to be around $1.3 bn. Aban has already spent $528 mn to acquire around 40% of Sinvest so far. This stake is currently held by Aban Singapore. Of this total investment, $450 mn is debt. Of the total additional $800 mn needed for the open offer, $625 mn will be debt. Thus, of the total $1.35 bn spent on the acquisition, $1.075 bn is debt. Sources say that Aban Offshore has availed the facilities of non-recourse debt. On the equity side, Aban Singapore is raising $150 mn via convertible notes by private placement. These notes will account for 10.37% of Aban Singapore’s equity after conversion, valuing Aban’s stake at $1.296 bn. The market cap of the parent company, Aban Offshore, was $1.462 bn at Friday’s closing price of Rs. 1, 383 on the BSE on Friday.

The open offer will be made by the Aban International Norway, a Norway-registered company and a wholly-owned subsidiary of Aban Singapore. The offer price set for Sinvest shares is Norwegian Kroner (NOK) 135, according to Oslo Stock Exchange filing by Aban.

Like Aban, Sinvest is also an owner of jack-up drilling rigs. Drilling rigs and offshore vessels are required for exploration and production of oil and gas. The charter rates for these rigs have shot up in the past few years due to the continued strength in oil prices and consequently, an increase in exploration activities globally. The offshore scene in India has also witnessed frenzy, with a large number of New Exploration and Licensing Policy (NELP) blocks in that space. Large gas discoveries by major operators like Reliance Industries, GSPC and ONGC in the recent past will also lead to higher demand for such rigs and offshore assets. India-based offshore companies have placed orders for six drilling rigs in 2006.

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