Tidewater to Become Largest OSV Operator Through Acquisition of SPO
Tidewater, a U.S.-headquartered operator of offshore support vessels, has entered into a definitive agreement to acquire Swire Pacific Offshore, a Singapore-based operator of specialized offshore support vessels servicing the energy industry. According to the companies, the combined fleet, which will number 203 crew boats, tug boats, and maintenance vessels, will become the largest fleet of OSVs with operations in all the major offshore markets.
The acquisition follows the trend as the offshore market continues to consolidate and reposition. Tidewater, which completed a previous merger four years ago, said the combination will double its position in West Africa and strengthen operations in Southeast Asia and the Middle East, positioning the company to “capitalize on the continued improvement in the offshore supply market.”
The transaction is valued at approximately $190 million which analysts said was a compelling valuation for Swire Pacific Offshore’s fleet of 50 vessels. Swire Pacific will receive a $42 million cash payment along with 8.1 million warrants to acquire 15.6 percent of Tidewater’s outstanding common stock at a nominal cost. The warrants are being called Jones Act warrants, structured to comply with the foreign ownership limitations of Tidewater’s common stock under the terms of the U.S. Merchant Marine Act of 1920, commonly known as the Jones Act.
“The acquisition of Swire Pacific Offshore marks another important milestone in the strengthening of Tidewater’s leadership position as we capitalize on the recovery in the OSV industry,” said Quintin Kneen, President and Chief Executive Officer of Tidewater. “I believe that the timing of this acquisition will allow Tidewater to capitalize on the continued improvement in the offshore supply vessel market, providing Tidewater with significant additional earnings and free cash flow generation potential as utilization and day rates continue to improve. All 50 acquired vessels are currently active and working throughout the world, allowing Tidewater to immediately leverage this new asset base.”
After completing the acquisition, Tidewater will leapfrog past Bourbon Offshore and Edison Chouest, each of which has fleets of approximately 140 vessels. Tidewater acquires 29 AHTs vessels and 21 PSVs with Swire Pacific Offshore. Half of the acquired fleet is active in West Africa which is a rapidly growing market for offshore services. The acquisition also enhances the company’s position in Southeast Asia which Tidewater highlighted as providing an opportunity to participate in the oil and gas market and providing a platform to pursue offshore wind development which is expected to grow rapidly in the region.
Established in 1975, Swire Pacific Offshore operates today in both the major offshore production and exploration regions. Its parent company, Swire Pacific, noted that the sale was keeping with its strategy to focus its investments on core businesses including property, beverages, aviation, and the healthcare sector. With the previously announced sale of Hongkong Dockyards, Swire Pacific will no longer operate any marine services businesses.
In addition to the expanded fleet and strengthening the company’s areas of operation, Tidewater highlighted that it has identified $45 million of annual cost synergies that it will target after the combination. The company will also maintain a strong balance sheet with approximately $110 million in cash.
The transaction was unanimously approved by Tidewater’s board of directors and is expected to close in the second quarter of 2022.