A proposed RM11.9 billion corporate exercise is in the making to merge SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd to become one of the world's largest oil and gas service providers via a special purpose vehicle (SPV).
Under the exercise, Integral Key Sdn Bhd (IKSB), the SPV created by Mayban Ventures Sdn Bhd, has offered to acquire the assets and liabilities of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd in a share swap plus cash deal worth RM11.9 billion.
The merger offer priced both stocks at a record, but came in below some analysts' optimistic targets for the two oil and gas firms. IKSB's offer values SapuraCrest at RM4.60 a share, and Kencana at RM3 a piece — a slight premium to their closing prices last Friday of RM4.49 and RM2.80, respectively.
"It will be a merger of equals," Maybank Investment Bank CEO Tengku Datuk Zafrul Tengku Abdul Aziz said at a press briefing to announce the deal Monday.
The offer values SapuraCrest at RM5.87 billion or RM4.60 a share to be settled through RM875 million cash and 2.5 billion new IKSB shares at RM2 each. This translates into cash payment of 68.5 sen and RM3.915 of IKSB shares per SapuraCrest share.
For SapuraCrest's 40.1% stake owner, Datuk Shahril Shamsudin, his interest in the SPV is estimated at 20% post-merger.
IKSB has valued Kencana at RM5.98 billion or RM3 per share, including the new Kencana shares to be issued for the acquisition of subsea engineering firm Allied Marine and Equipment Sdn Bhd and ESOS.
Kencana will receive RM969 million and 2.51 billion new IKSB shares at RM2 each, translating into 48.6 sen cash and RM2.514 of IKSB shares for each Kencana share.
Main shareholder Khasera's 32.4% stake in Kencana will become 16.2% in IKSB.
Basically, all shareholders will see their stakes in the respective companies cut by half in the new enlarged entity.
IKSB's offer was presented to the companies Monday, and trading in both stocks was suspended for the whole of yesterday. The offer is valid until Aug 15.
The proposed exercise is similar to the Sime Darby Bhd merger deal some years ago.
While the offer was from Maybank, Tengku Zafrul said the principal shareholders of both SapuraCrest and Kencana were aware of the proposed deal even before it was announced.
"The boards (of SapuraCrest and Kencana) will need to decide whether to accept and present it to their shareholders or reject it," he said.
Assuming the deal goes through, the merger will create one of the world's biggest oil and gas service providers by market value (at RM10.9 billion as of Friday) and having total assets of RM6 billion.
The whole exercise can be completed within the next six to eight months.
Both SapuraCrest and Kencana are partners with a 25% stake each in a marginal oilfield development project awarded by Petronas on Jan 31.
The corporate exercise is jointly advised by Maybank Investment Bank and CIMB Investment Bank.
