Italian shipbuilder Fincantieri has agreed to acquire STX Group’s 50.75% stake in STX OSV, at S$1.22 cash per share - representing a 12.9% discount to pre-acquisition closing price of S$1.40. The transaction should complete within the first four months of 2013, after which Fincantieri will make a General Offer (GO) for the remaining shares under the same terms. We feel that the GO is unlikely to succeed. In our view, the low offer price undervalues STX OSV business and could possibly be motivated by STX Group’s desperation to raise cash. While we continue to like the counter, we lowered our FV to S$1.52 after applying a 10% discount (to previous FV of S$1.69), to account for near term uncertainties arising from (i) Fincantieri being the new controlling shareholder and (ii) the possible GO. Maintain BUY.
Fincantieri to acquire 50.75% stake
Italian shipbuilder Fincantieri has agreed to acquire STX Group’s entire 50.75% stake in STX OSV at S$1.22 cash per share, representing a 12.9% discount to the pre-acquisition closing price of S$1.40. The transaction should be completed within the first three months of 2013, after which Fincantieri would make a General Offer (GO) to acquire the remaining shares under the same terms. Supposing the acquirer receives 90% acceptance, it may delist STX OSV. According to Fincantieri, this acquisition is a strategic long-term investment and helps enrich its offshore oil and gas product portfolio. The total value of the acquisition, including the GO, would amount to EUR900m (S$1.45b) and will be financed from Fincantieri’s internal resources and syndicated loans.
What’s the risk to non-controlling shareholders?
Clearly, one key risk to non-controlling shareholders is the possibility that STX OSV shares may be delisted at an unfavourable price. However, we feel that the GO is unlikely to succeed. In our view, the low offer price undervalues STX OSV business and could possibly be motivated by STX Group’s desperation to raise cash. Other associated risks include (i) Fincantieri’s unproven track record in managing the offshore business, (ii) possible changes to STX OSV’s business model and (iii) vulnerability to political interference (as Fincantieri is ultimately owned by the Italy government).
Lower fair value to S$1.52 on uncertainty
While we continue to like counter, we lowered our FV to S$1.52 after applying a 10% discount (to previous FV of S$1.69), to account for near term uncertainties arising from (i) Fincantieri being the new controlling shareholder and (ii) the possible GO. Maintain BUY.
Italian shipbuilder Fincantieri has agreed to acquire STX Group’s entire 50.75% stake in STX OSV at S$1.22 cash per share, representing a 12.9% discount to the pre-acquisition closing price of S$1.40. The transaction should be completed within the first three months of 2013, after which Fincantieri would make a General Offer (GO) to acquire the remaining shares under the same terms. Supposing the acquirer receives 90% acceptance, it may delist STX OSV. According to Fincantieri, this acquisition is a strategic long-term investment and helps enrich its offshore oil and gas product portfolio. The total value of the acquisition, including the GO, would amount to EUR900m (S$1.45b) and will be financed from Fincantieri’s internal resources and syndicated loans.
What’s the risk to non-controlling shareholders?
Clearly, one key risk to non-controlling shareholders is the possibility that STX OSV shares may be delisted at an unfavourable price. However, we feel that the GO is unlikely to succeed. In our view, the low offer price undervalues STX OSV business and could possibly be motivated by STX Group’s desperation to raise cash. Other associated risks include (i) Fincantieri’s unproven track record in managing the offshore business, (ii) possible changes to STX OSV’s business model and (iii) vulnerability to political interference (as Fincantieri is ultimately owned by the Italy government).
Lower fair value to S$1.52 on uncertainty
While we continue to like counter, we lowered our FV to S$1.52 after applying a 10% discount (to previous FV of S$1.69), to account for near term uncertainties arising from (i) Fincantieri being the new controlling shareholder and (ii) the possible GO. Maintain BUY.
No comments:
Post a Comment