Subsea 7 Makes and Withdraws Offer to Merge with DOF
Days after promoting the merits of combining the offshore operations of Subsea 7 and DOF, rebuffed by the board of directors, Subsea 7 confirmed that it would let its offer expire. The company had offered a premium of 25 percent to the initial public offering of DOF which is restructuring with the support of John Fredriksen in the wake of DOF’s bankruptcy earlier this year.
Subsea 7 announced its offer last Friday, June 16 saying that it would provide a means of accelerating shareholder return. They said the combination provided a significantly earlier and more material return of capital as well as increased liquidity for the Subsea 7 shareholders. At the same time, Subsea 7 said that the combination would create an enlarged fleet positioned to capitalize on positive developments in the subsea and offshore wind markets.
A week ago, DOF announced that it was commencing a stock offering in Norway designed to raise up to $54 million as part of the long restructuring process of the company. Famed investor John Fredriksen it was reported had agreed to take approximately half of the offering as a “cornerstone investor.” The proceeds of the offering are to be divided between the company and the banks and bondholders that took control of the company earlier in the year. DOF had been seeking to reorganize for nearly a year but failed to win shareholder support for the proposal leading to the bankruptcy filing.
Subsea 7 sent a letter of interest to the board of DOF dated June 15 which proposed the higher offer made up of a combination of stock and cash. DOF shareholders would have emerged holding 11.5 percent of the combined company.
DOF’s board responded immediately saying that while the offer was higher than the share price in the offering it is “below the value most shareholders have expressed willingness to sell at in the pre-sounding of the IPO.” They also cited the uncertainties that a deal could be reached noting the offer is conditional upon the parties reaching an agreement regarding the transaction, a due diligence to be conducted by Subsea 7, and conditions on the existing bank debt and bond debt facilities. Further, they noted that the IPO process, which is well underway, would have had to be canceled.
“While major shareholders in DOF we have contacted have expressed support for the industrial rationale for the combination and the attractiveness of the Subsea7 equity element of the offer, the board of DOF has refused to engage with Subsea7 on this offer,” Subsea 7 announced today. “Subsea7 is not prepared to amend its offer without the board of DOF expressing willingness to open a constructive dialogue.”
The company is reiterating the strategic rationale of the combination which it said addresses the conditions in the market. Subsea 7 has been aggressive in its strategy moving to combine the industry. In 2021, they moved to combine the company with OHT saying that they would create a larger, full-service company focused on the renewables business and the emerging opportunities in offshore wind, subsea oil and gas, creating Seaway 7 focused on renewables. This spring. Less than two years later, they announced they would require Seaway 7 after a disappointing performance. They highlighted the merging opportunities they see in the market from 2025 onward.