The Hindu Business Line : Great Offshore backs out of Sea Dragon buy

Mumbai, Aug. 20 Offshore services provider Great Offshore Ltd has decided to pull out of its proposed deal to acquire UK-based Sea Dragon Offshore for $1.4 billion.

Great Offshore, which has been negotiating with Sea Dragon for the last eight months now, has recently informed the foreign company of its decision to discontinue negotiations for the acquisition.

Even though Great Offshore has neither been naming the target company nor the reason for the pull out, sources say the reason was that the foreign company was not willing to re-visit the original price offer as was sought by the Indian firm.

In fact, Great Offshore had offered to prune the size of its original offer of $1.4 billion for the acquisition in July this year, but even this did not help in clinching the deal. Even till a little over a month ago, the company had been maintaining that due-diligence with the foreign entity was on track.

Confirming the development to Business Line, Mr Vijay Sheth, Managing Director of Great Offshore, made it clear that the decision to withdraw from the deal did not have any implication, financial or otherwise, on the company. Earlier, there had been reports that if Great Offshore chose to back out from the deal, it had to pay a penalty to the foreign company and vice-versa.

Would have been big

This was to be the biggest overseas acquisition by an Indian offshore company, after Chennai-based Aban Offshore’s buyout of Norwegian firm Sinvest for about $1.3 billion.

In January this year, Great Offshore had offered to buy out the Cayman Island-registered Sea Dragon for $1.4 billion. Upon acquisition of the foreign company, Great Offshore would have owned two sixth generation semi-submersible drilling rigs, which are presently under construction in Teesside, UK, with the hulls being purchased from Sevmash and Vyborg shipyards in Russia.

The revised offer of Great Offshore in July this year envisaged acquisition of one of the two rigs being built by Sea Dragon — the two rigs are scheduled for delivery in 2009 and 2010.

The acquisition would have lifted the status of the domestic company, as only a handful of such rigs are in operation around the globe — these are ultra-deep and harsh weather rigs capable of operating at water depths of up to 10,000 feet and drilling to a depth of up to 30,000 feet. With deep sea drilling activities gaining momentum around the world, such rigs are in great demand and command a premium in the rig hire market.

Rig shortage

With oil explorers facing a severe shortage of rigs globally, huge orders have been placed with shipyards across the globe over the last couple of years for these marine assets and shipyards are now booked for more than three years.

As per available data, 117 rigs, including semi-submersibles and jack-ups, are scheduled to be delivered over the next three years. There are reasons to believe that there could be delays in these orders, with deliveries of some 13 rigs of all types scheduled for 2007 already postponed to this year.

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More Stories on : Mergers & Acquisitions | Petroleum

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