Solstad Mega-Merger Creates Largest OSV Firm in Norway
Farstad Shipping announced Monday that its stakeholders have approved a three-way merger to combine its business with Solstad Offshore and Deep Sea Supply. The merged firm – to be called Solstad Farstad – will have a fleet of 154 modern ships, making it among the largest offshore vessel operators in the world.
"With this solution, we provide Farstad, Solstad and Deep Sea Supply with an industrial platform to sustain the current downturn in the OSV market and be well positioned to exploit a market recovery. We are pleased to have reached an agreement with our banks, bondholders and other stakeholders", said CEO Karl Johan Bakken of Farstad Shipping.
The complex transaction will leave Kjell Inge Røkke's Aker Capital with up to 25 percent of the new company and John Fredriksen-controlled Hemen Holding Ltd. with up to 19 percent, but the leading Norwegian shipowners have agreed to harmonize and equalize their stakes. Fredriksen and Røkke are said to have been closely involved in negotiating the terms of the merger.
The Solstad family will own about seven percent, and Solstad CEO Lars Peder Solstad is proposed as the leader of the merged entity. It is Solstad's second major M&A transaction in a year, following the purchase of REM Offshore last July.
Under the terms of the agreement, Farstad and Deep Sea Supply will merge into Solstad and become its subsidiaries, and their shareholders will receive shares in the combined entity as a consideration. The merger will occur simultaneously with a debt-for-equity swap for Farstad, in which its lenders and bondholders will trade a combined $350 million in principal, interest and other charges in exchange for new shares. The merger still has to be approved by the boards of Solstad and Deep Sea Supply, and it must pass a regulatory review.
Once finalized, the merged entity will have 33 CSVs, 66 PSVs and 55 anchor handlers at its disposal, making it by far the largest Norwegian offshore company. However, analysts caution that improving utilization for these vessels may take time in today’s down market – at present only 63 out of a total of 154 are in circulation – and the combined firm will still have billions in debt on its balance sheet.