Kencana Petroleum Group has proposed to acquire 100% equity interest in Allied Marine and Equipment Sdn Bhd (AME) for RM400mil in its move to become a fully-integrated oil and gas (O&G) player.
Kencana, in its filing with Bursa Malaysia yesterday, said it had executed a conditional sale-and-purchase agreement for the proposed acquisition where it would be satisfied via share swap. Kencana would issue 149.2 million new ordinary shares of 10 sen each in Kencana at an issue price of RM2.68 per share.
The vendors of AME are Worldclass Inspiration Sdn Bhd and Allied Asset Holdings Sdn Bhd.
AME is involved the provision of offshore diving and underwater-related services for inspection, repair and maintenance of structures, pipelines and risers and for the construction of underwater facilities for the O&G industry.
According to Kencana, the proposed acquisition would open the door to gain exposure to a rapidly-growing offshore subsea business in Malaysia and South-East Asia.
“It would provide an opportunity to leverage on AME's customers and to cross-sell services across clients of both group of companies i.e. Kencana Petroleum Group and AME Group.
“Additionally, it will enable Kencana Petroleum Group to recognise in full the earnings stream and cash flows that is expected to be generated by AME and is expected to expand Kencana recurring revenues with higher margins being earned.
“There are also potential cost synergies for Kencana Petroleum Group with the possibility of AME group providing services to Kencana in-house subsea services requirements apart from savings on general and administration overheads,” it said.
For the past three years, apart from Malaysia, AME had also undertaken various projects for multinational oil and gas players in Indonesia, Vietnam, China and India.
The vendors guaranteed to Kencana Petroleum that AME's audited consolidated profit after tax for each of the financial years ending Sept 30, 2011 and Sept 30, 2012 shall not be less than RM40 million.