Beng Kuang Marine is proposing to acquire the remaining 49% stake it does not own in its 51%-owned subsidiary, Asian Sealand Offshore and Marine (ASOM), for $60 million.
The group entered into a term sheet with Isustainability, SPRG, Leonard Chia Choong Leng and Ng Leng Soo in relation to the proposed acquisition, which remains subject to a definitive sale and purchase agreement (SPA). Chia owns Isustainability, which owns 24.5% of ASOM. Ng owns SPRG, which owns the remaining 24.5%.
The consideration is based on an internal assessment of about $122 million for ASOM, its subsidiaries and associated company and represents a P/E ratio of eight times of its FY2025 profit after tax. This will be supported by an independent valuation to be commissioned by Beng Kuang Marine.
Of the total consideration, $20 million will be paid via the issuance and allotment of 57.1 million new shares in Beng Kuang Marine at 35 cents per share. The issue price represents a premium of about 12.8% to the volume weighted average price (VWAP) of 31.04 cents per share for trades done on Feb 23.
Another $20 million will be paid via cash upon completion while the balance of $20 million will be paid in cash as “deferred and contingent” consideration subject to ASOM’s financial performance for FY2026 and FY2027.
As at Feb 26, ASOM has three wholly-owned subsidiaries, ASIC Engineering Sdn. Bhd., PBT Engineering Resources Pte. Ltd. and Asian Sealand Offshore and Marine International Inc. and one 49%-owned associated company, Asian Sealand Offshore and Marine Inc.
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ASIC provides infastructure engineering and services, while PBT Engineering builds and repairs ships, tankers and other ocean-going vessels. Asian Sealand Offshore and Marine International is an investment holding company while ASOM’s 49%-owned Asian Sealand Offshore and Marine provides onshore support services including workers’ accommodation, land-based logistics and onshore technical and engineering services.
In FY2023, FY2024 and FY2025, ASOM reported profits after tax of $10 million, $19.3 million and $14.9 million respectively. The company’s revenue stood at $50.6 million, $86.3 million and $75.2 million.
According to Beng Kuang Marine, ASOM is a “core operating subsidiary” and has significantly contributed to the group’s revenue and profitability in recent financial years. It adds that the P/E multiple is “within the range of comparable offshore lifecycle service providers, considering recurring revenue and cash generation”.
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Following the completion of the proposed acquisition, Isustainability and SPRG will become Beng Kuang Marine’s new substantial shareholders. Chia and Ng will continue playing active management roles in ASOM.
The proposed acquisition is expected to be accretive to Beng Kuang Marine’s earnings but will result in lowered net tangible assets (NTA) per share from goodwill. It does not reflect the deterioration in the underlying operating performance or cash-generating capability of the group, says Beng Kuang Marine. The group adds that it expects goodwill to happen upon the completion of the acquisition, representing the “value of future growth, workforce and synergies”.
Once the acquisition is completed, Beng Kuang Marine’s net tangible liability (NTL) per share will be lowered to negative 0.67 cents per share, compared to an NTA of 12.64 cents. Its net asset value (NAV) will, however, increase to 17.44 cents from 12.64 cents.
Beng Kuang Marine’s earnings per share is expected to increase to 4.80 cents from 2.61 cents.
Placement agreement
In a separate statement issued on Feb 26, Beng Kuang Marine says it has entered into a placement agreement with SAC Capital.
Under the agreement, SAC Capital has agreed to to procure subscriptions for up to 15.6 million shares in Beng Kuang Marine for up to $5 million or 32 cents per share.
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The proposed placement is not underwritten and will take place via an exempt offering in Singapore.
The placement price represents a premium of 3.09% to Beng Kuang Marine’s VWAP of 31.04 cents per share on Feb 23.
The shares represent 7.48% of Beng Kuang Marine’s existing issued and paid-up share capital of 209 million shares.
The funds raised from the proposed placement will go towards Beng Kuang Marine’s working capital. The net proceeds may be deposited with banks or financial institutions or invested in short-term money market instruments or marketable securities and, or used for other purposes pending their deployment.
Shares in Beng Kuang Marine last traded at 32 cents before its trading halt on the morning of Feb 24.
