Scomi gets new partner for coal logistics biz
Scomi Marine Berhad (Scomi Marine) has announced that it had entered into heads of agreement with PT Rig Tenders Indonesia TBK (PTRT) and Portside Offshore Inc (POI), which is owned by a privately managed Indonesian fund, in relation to POI acquiring a significant stake in PTRT. PTRT is an 80.54%-owned subsidiary of Scomi Marine Services Pte Ltd (Scomi Marine Services), which in turn, is a wholly-owned subsidiary of Scomi Marine.
The exercise involves Scomi Marine Services disposing its 100% equity interest in CH Logistics Ltd (CHL), CH Ship Management Pte Ltd, Goldship Pte Ltd and Sea Master Pte Ltd a wholly-owned subsidiary of CHL, to PTRT Grundtvig Marine Pte Ltd, a wholly-owned subsidiary of Scomi Marine Services, will also dispose its entire equity interest in PT Batuah Abadi Lines, to PTRT. The aggregate disposal consideration amounts to US$171,800,000 (approximately RM550 million).
PTRT plans to satisfy the acquisition in cash. Towards this end, PTRT proposes to undertake a Renounceable Rights Issue that will entail the issuance of 1.3 billion to 1.8 billion Rights Shares to raise additional funds. Scomi Marine Services, with its 80.54% stake in PTRT, will renounce its entitlement to Rights Shares, and POI will subscribe for all Rights Shares that are renounced or not subscribed to.
Following the completion of the exercise, Scomi Marine Services’ equity interest in PTRT will be diluted. As a result, PTRT will cease to become a subsidiary of Scomi Marine Services but will instead become an associated company.
Mukhnizam Mahmud, President of Scomi Marine Bhd, said, "In view of the operational and regulatory landscape today, this significant corporate exercise is both strategic and timely. The marine logistics and offshore support vessel businesses in Indonesia have become increasingly challenging given the intensifying competition, changes to local regulations relating to ownership and cabotage as well as pressures on charter rates. In order to stay competitive, significant capital expenditure is required to replace vessels and tap opportunities in terms of opening up new markets."
"We recognise the need for a strategic investor that can play an integral role in growing our business. We are confident that together with POI, we will have the capability, capacity and global network required to take the significantly enlarged PTRT to greater heights of success."
According to Mukhnizam, this exercise will see Scomi Marine reposition itself to become a well-capitalised marine logistics player that is equipped to embark on tapping growth opportunities in emerging markets. "We have identified India as a primary target market with enormous demand and high growth opportunities," he added.
"On the other hand, we are still bullish on the Indonesian market as its coal production sector is expected to expand, thus increasing the need for marine logistics services. Hence, this exercise will also enable Scomi Marine to tap into the growing demand for Indonesian national vessels as a result of the new cabotage laws that will be taking effect. The corporate exercise is subject to approvals from the relevant shareholders as well as regulatory authorities in Malaysia, Singapore and Indonesia. Scomi Marine expects to receive approximately RM550 million in cash upon completion of the proposed disposals.
"All in all, remaining with our status quo is not an option. We have selected to dispose our existing assets today so that we can participate and harvest greater rewards in a bigger, stronger entity in the foreseeable future."
"Scomi Marine will continue to participate in the management of PTRT following the conclusion of this exercise. We expect minimal changes to our current management and human capital composition at the initial stage, which is important for continuity and a key component to our future success," Mukhnizam clarified.
Mukhnizam also said that this exercise will eventually see PTRT becoming an end-to-end solutions provider in the coal sector. "PTRT will also be able to expand into the long haul coal transportation sector as it will be able to consider acquiring Panamaxes to cater for this sector." "Given the positive prospects ahead, we are confident that Scomi Marine shareholders will continue to benefit from PTRT’s success in the foreseeable future via our remaining interests in PTRT," he concluded.