EMGS Expands into Subsea Construction via Vessel Acquisition
EMGS Expands Subsea Construction Business
Electromagnetic Geoservices ASA (NASDAQ: EMGS) has taken a monumental step to grow its presence in the offshore subsea construction market. This strategic decision comes as the Company forms a new subsidiary aimed at acquiring the OSCV Siem Day vessel, marking an important milestone in its development.
Details of the Vessel Acquisition
The OSCV Siem Day, a cutting-edge subsea construction vessel built in 2013, is designed for operational efficiency and effectiveness. EMGS's acquisition is seen as a vital element in diversifying its business, expanding beyond its core electromagnetic activities into the rapidly evolving subsea construction segment.
Transaction Framework and Financial Overview
The acquisition will be facilitated through a five-year bareboat charter agreement with the Seller, starting at a competitive daily rate. This charter structure is designed to minimize immediate monetary impact on the Company, with a total acquisition price of USD 108.90 million aligned to ensure a smooth financial transition. The initial payment of USD 10.89 million is set to be funded through enhancements to the Company’s existing bond loan.
Notably, this venture does not compel existing shareholders to inject new capital for securing the submarine vessel, sustaining stability in shareholder equity. The financial backing from the Company’s two largest bondholders is unequivocally lending substantial support to this strategy, allowing EMGS to proceed without fundraising from its current investors.
Enhancing Shareholder Value
This acquisition sets the foundations for an expanded revenue stream, particularly as the vessel is operating under market standard rates until the end of 2025. The financial logistics are designed to ensure that expected income from the newly acquired vessel can cover charter obligations along with operational expenses, thereby preserving EMGS's financial health.
Further into the future, following the expiring charter term, EMGS plans to leverage market opportunities for potentially lucrative charters, with anticipated spot rates between USD 100,000 and USD 140,000 per day, positioning the Company for substantial growth.
Long-Term Vision for Growth
The overarching strategy for EMGS underscores a commitment to pursuing growth in the subsea sector by adding further assets. The acquisition of the Siem Day vessel is a high-value asset poised to furnish shareholders with enhanced returns, facilitating further movement in the competitive subsea landscape.
This diversification effort is crucial, as it allows EMGS to maintain its core electromagnetic operations while seamlessly branching into promising avenues, thereby mitigating risks through strategic expansion.
Corporate Governance in Relation to the Acquisition
The acquisition of the OSCV Siem Day entails corporate governance protocols to uphold fairness and integrity during the process. The Seller is a subsidiary of Siem Offshore, with Perestroika AS securing a minority ownership stake. An independent fairness opinion from Arctic Securities AS confirms that this maneuver is financially equitable for all EMGS stakeholders.
Included within this transaction is a parent company guarantee that will need shareholder approval to uphold corporate compliance according to local regulations. The Board is working diligently to ensure that all facets of this agreement are transparent and just.
Next Steps and Operational Preparedness
Looking ahead, EMGS plans to partner with Aurora Offshore Management AS for managing the operational tasks of the newly acquired vessel, aimed at maintaining cost efficiency and enhancing operational productivity. The projected daily operational costs are approximated at USD 22,000, ensuring the ongoing effectiveness of the venture and alignment with market practices.
Addressing Challenges Ahead
In tandem with this acquisition, EMGS aims to address upcoming challenges, notably with the maturity of outstanding convertible bonds. Strategies for extending maturity timelines are anticipated to be positively received by the Company’s significant shareholders, indicating a cohesive support framework for the Company's growth objectives.
Further updates concerning this transaction and EMGS's broader strategy are expected to follow, highlighting the Company’s proactive approach in the competitive subsea industry.
Frequently Asked Questions
What is the primary purpose of EMGS's new acquisition?
The acquisition aims to expand EMGS's operations into the subsea construction market, diversifying its business and enhancing shareholder value.
How is the acquisition of OSCV Siem Day financed?
The acquisition is financed via a five-year bareboat charter agreement and existing bond loans, with no new capital requested from shareholders.
What are the day rates for the Siem Day vessel?
The vessel will operate at a day rate that reflects competitive market pricing, with rates potentially rising to between USD 100,000 and USD 140,000 after the initial charter period.
Who will manage the operations of the Siem Day vessel?
Aurora Offshore Management AS has been selected for technical and commercial management of the vessel, ensuring that operations run efficiently.
What are the future plans for EMGS after this acquisition?
EMGS plans to expand its fleet within the subsea sector with further vessel acquisitions while maintaining its existing electromagnetic business operations.
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