By Xavier Kong
Tanjung Offshore recently aborted a reverse takeover deal with Bourbon’s South Asia arm, claiming a mutual termination. However, Tiger wonders. Was this particular venture doomed to begin with?
As always, in life, there are decisions to be made. Of those decisions, there is always a hard option, and an easy option. However, there is also something to be said about a bad decision. While some make those without considering all the information, which just makes the whole thing a rash decision, there are also those who make bad calls even with all the information, and that just draws a head-shake from Tiger.
One case to highlight this would be the reverse takeover (RTO) of Tanjung Offshore, which was recently discontinued on mutual agreement between all parties involved, as the economic and financial conditions for an agreement satisfying both parties could not be met in view of the declining oil prices. On the surface, this seems usual. An agreement is not going to work out? We discontinue it. Sounds like another deal that fell through.
However, there are a few points that Tiger would like to bring up, that makes Tiger feel the call to even enter the deal was rash and/or a bad call. The first is the point that Tanjung Offshore, after selling their marine vessel arm to Ekuiti Nasional for RM220 million, had agreed to a clause of non-competition with Ekuinas, which would last three years, and only slated to end somewhere around mid-2015.
This sounds fine on its own, except that the reverse takeover would violate that particular agreement. Yes, Ekuinas was consulted and talks were going on between the duo, but this really does not cover up the fact that the group had made plans based on the approval of an entity that would have just cause to be opposed to their proposal. This is really not the best way to go about a deal.
The next point would be the topic of the deal itself. With the reverse takeover by Bourbon’s South Asia arm, as well as a few other companies which would in turn provide Tanjung Offshore with a ready offshore support fleet, Tanjung looked set to hop back into the oil and gas game. But at a time like this, when the prices of crude oil have fallen as far as US$49.66 per barrel over the last few months? This just seems to be a bad play, considering oil prices have started falling since June 2014, which was when the parties came to a Heads of Agreement for the reverse takeover deal.
Of course, it does not help that the price of oil falling so low is being seen as a move by the Organisation of Petroleum Exporting Countries (Opec) to kill shale gas ventures. While the larger oil producers in the Middle East have no problem, considering the margins prior to the fall in crude oil prices, the move is also killing smaller players in the oil and gas field along with the shale gas ventures.
Another point comes about when the group failed to take into account the wishes of minority shareholders when the deal was first proposed. Is a deal for the group not meant to be for the benefit of the entire group? Was it meant to be selective which shareholders received benefits from the shares they held in the group?
Tanjung Offshore’s case was definitely not aided by their lack of disclosure of the deal, even to their own shareholders. A Bursa Malaysia announcement, which came out after the minority shareholders’ spokesperson had reached out to the media, was a statement that the deal would be negotiated to benefit all shareholders, and that yes, they were negotiating a waiver from Ekuinas for the three-year non-competition clause of the sale. Why is it that minority shareholders, who are most definitely shareholders, by the way, were marginalised to such an extent, as to not know of the proceedings of the deal? Tiger smells something fishy, and not of the good variety, either.
It all just seems a mess. Why did Tanjung Offshore not secure a waiver from Ekuinas before proposing the deal? Why was the deal not made with proper regard to global oil prices at the time? Did the group not see the potential fall in oil prices? Why were shareholders marginalised?
That’s too many questions about a deal that there are no readily available answers for, and Tiger is now sceptical about what the group might call the best interests of the shareholders and the group itself.
Then again, this is all moot, is it not, considering the deal has been aborted? With Tanjung Offshore having expected to pay for the RTO by means of shares priced at 70.8 sen apiece, and the group’s steadily declining share price since the deal from its peak at 65 sen to its current 35 sen, Tiger is pretty sure cutting the deal would have been the smart option. Then again, why was there the deal in the first place? Tiger may never know.
GRRRRR!!!
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