Shipping giant MISC Bhd and oil and gas services provider Bumi Armada Bhd are said to be in merger talk involving the consolidation of the floating production storage offshore (FPSO) businesses of both companies, say local media reports.
Petroliam Nasional Bhd (Petronas) owns 62.67% in MISC. As such, investors could be anticipating that Bumi Armada may win Petronas contracts if a deal materialises. If it materialises the consolidation in the FPSO sector will also create a giant in the business.
According to news reports, MISC may sell its FPSO business to Bumi Armada in exchange for Bumi Armada shares.
Bumi Armada, which is controlled by tycoon T. Ananda Krishnan is the world’s fifth largest FPSO operator, with nine FPSO vessels.
CIMB Research says the merger deal between MISC Bhd and Bumi Armada Bhd offers an opportunity for MISC to grow its portfolio of stable cashflow assets, while growth in the oil and gas environment is stagnant.
“If the pricing is right, this deal could be good for both companies,” the research house said in a note on Monday.
Public Investment Bank Bhd analyst Mabel Tan wrote in a note today a deal would be a win-win situation for MISC and Bumi Armada.
"If this exercise does materialise, we would be positive for both BAB (Bumi Armada) and MISC, with BAB potentially receiving more Petronas jobs, while MISC benefiting on an associate level from BAB’s on-stream earnings enhancement from its various long-term FPSO contracts," The Edge Financial reported quoting Tan.
StarBizweek earlier reported that MISC is in preliminary discussions to merge its FPSO assets with Bumi Armada’s, in exchange for shares in the latter company.
MISC currently has 12 FPSO assets, while Bumi Armada owns nine FPSOs (six in operation, three under conversion).
The bulk of Bumi Armada’s contracts are from the overseas markets and it hardly gets any from Petronas currently.