Ingmar den Blanken, Treasurer of Fairstar negotiated the deal with the banks and provided the following additional details, “The facility has a one year term and is priced for the first nine months at LIBOR plus 400 basis points, rising to LIBOR plus 600 basis points after nine months. In addition to providing the funds we need to pay our obligations for the FORTE and FINESSE, it re-finances the current loans we have with HSH Nordbank and ABN AMRO. The banks will hold first mortgages over the Fairstar fleet once funding has been made. While the terms are not nearly as attractive as the DNB Bank facility we signed last year, in light of the recent disruption to our business caused by Dockwise, we are pleased to be able to satisfy our obligations to GSI as well as our obligations to our “red box” clients.”

Philip Adkins, Chief Executive Officer of Fairstar provided further elaboration:

“We were very clear to the market last week that the payments we are obliged to make will be made and the performance bonds we are obliged to issue will be issued. At Fairstar, we keep our promises. Fairstar is a very valuable company.

It is clear to the market that Dockwise has been trying to talk down the value of our business in order to acquire it at the cheapest possible price. Their most recent tactic was to suggest in their stock exchange release that Fairstar was unable to honour our financial commitments. Behind the scenes, they have also tried to intimidate our Directors and mislead our clients. We continue to believe that hostile and dirty tactics are not in the best interests of creating value for all of our stakeholders. The fact that they exploited the financial instability of one of our large shareholders (Oceanus) and the naiveté of others in order to acquire a large stake in Fairstar, before making their intentions public, has nothing to do with the value of our business.

More importantly, the accretive value of our business to Dockwise has been completely overlooked in their Offer Document. We have invited representatives of Dockwise to meet with Fairstar and discuss in a constructive way how best to end the current hostile stalemate. Now that our financial obligations have been met, Dockwise must be prepared to address the facts that 46% of our shareholders have not accepted the NOK 9.3 “offer” and Fairstar’s shares have been consistently trading above that level since the attack on Fairstar began. Our clients have been very uncomfortable with the tactics that have been used by our competitor. It seems inappropriate to suggest to our partners that Fairstar needs to be saved by Dockwise. I am certain our clients knew what they were doing when they chose to award almost USD 300 million in contracts to Fairstar. The Fairstar Boards are preparing a formal rebuttal to the Offer Document that is now in circulation. In the meantime our invitation for a constructive dialog goes unanswered.”

The FJELL transporting the Perro Negro jackup, image courtesy Fairstar

Fairstar Heavy Transport N.V. (FAIR) announced today the award of  a new contract to transport the jack-up drilling rig OFFSHORE VIGILANT from Port of Spain, Trinidad to Vung Tau, Vietnam on Fairstar’s semi-submersible vessel FJELL. The contract value is USD $2.9 million and the loadout is expected to commence at the end of MAY.

Willem Out, COO of Fairstar, commented:

“It is business as usual at Fairstar. This voyage positions FJELL almost perfectly to be in the Far East just in time to begin her work on the Gorgon contract in August. Once the rig has been safely discharged, we will put FJELL into dry-dock and prepare the ship for Gorgon certification.”

FJELL has just safely discharged two concrete power generating barges for the Chevron EGTL project in Escravos, Nigeria and is en route to Port of Spain.

Facing a hostile takeover by heavy lift giant Dockwise, business at Fairstar appears anything but “usual” however.

In another announcement today, Fairstar informed Dockwise:

The unsolicited financial proposal received from Dockwise is of no interest to Fairstar. Dockwise has attempted to characterize the offer of USD 30 million in “subordinated debt” to be an attempt by Dockwise to be helpful. However, a close reading of the Dockwise proposal revealed it to be another opportunistic device to try and lock in a NOK 9.3 ceiling for Fairstar shares. Fairstar does not consider “poison pills” of any sort to be appropriate tools in the proper management of our Stakeholders’ interests.

Fairstar’s comments stem from Dockwise’ statement,

“The financial situation of Fairstar is concerning and therefore at the AGM, Dockwise offered again to the Fairstar Boards to discuss how Dockwise could assist Fairstar with its financing. Dockwise had before repeatedly stated to the Fairstar Boards that it is willing and able to discuss with Fairstar the terms of required financing including a potential capital injection of USD 50-100 MM.”

Which was then followed by Dockwise’s offer,

“To assist in Fairstar’s short term financing needs by providing a USD $30 million subordinated loan, for a period of up to 3 years, with interest of 1% over LIBOR for the first 2.5  months and 6% over LIBOR thereafter, to bridge the period to an equity offering of between 20 and 60 million shares, at NOK 9.30, with full protection of the pre-emptive and other rights of all the Fairstar shareholders.  The proposed USD $30 million short term financing would be part of the potential overall capital injunction by Dockwise of USD $50-100 million referred to above.”

Image: Fairstar

Dockwise, via their wholly-owned subsidiary Dockwise White Marlin B.V., announced today the unconditional mandatory offer for all the issued and outstanding shares of Fairstar Heavy Transport N.V. (“Fairstar”) at a price of NOK 9.30 per Fairstar share.

The offer price represents a premium of more than 22 percent compared to the closing price of the Fairstar shares on Oslo Børs on 20 April 2012, which was the last trading day prior to the announcement of Dockwise’s agreements to acquire approximately 54 percent of the shares in Fairstar.  Whether intentional or not, this announcement comes on the back of Fairstar’s Annual General Meeting (AGM), held yesterday.

Frits van Riet, Chairman of Fairstar’s Supervisory Board comments on yesterday’s AGM:

In spite of having made it perfectly clear to Dockwise/White Marlin early last week that their participation was welcome and all of their rights and voting powers would be recognized, they attempted to stop the meeting by going to Court in the Netherlands. When they came to the realization that they would not succeed in frustrating our commitment to proper corporate governance, they withdrew their case and attended the AGM this morning. Unfortunately, in spite of our desire to enter into a constructive dialog, Dockwise/White Marlin decided to use the occasion to vote against all of the resolutions on the Agenda with one exception (the appointment of KPMG as the auditors of the Company). While this is not a surprise, it continues to raise our concerns that the opportunistic and hostile approach by Dockwise/White Marlin must be regarded with concern.

The offer period in Dockwise’s Mandatory Offer runs from and including 15 May 2012 to 17:30 hours (CET) on 12 June 2012, and may be extended by up to two weeks.

Dockwise
FAO: Mr P Wit
and FAO: Mr J van Wiechen
Lage Mosten 21
4822 NJ Breda
Rotterdam, Netherlands

Subject: Fairstar

Dear Peter/Jaap,

Thank you for your letter of May 9, 2012. Frits and I have reviewed it together as well as discussed it with our legal advisors.

It is now a matter of fact that you own approximately 54% of Fairstar. Therefore, we expect to receive an unconditional and properly prepared offer to all Fairstar shareholders to purchase their shares. We expect this offer to be fully compliant with the appropriate rules governing takeover of public companies.

Once a proper offer has been made, Fairstar will study it carefully and commission an independent authority to assess the “fair value” of your offer. This “fair value opinion” will have considerable influence on the decision of the Joint Boards of Fairstar to recommend your offer to shareholders. As you know, the 40% of shareholders who have not accepted your offer to date are sophisticated, professional investors. We have been in close contact with all of them in the last few days. I would assess the willingness of these shareholders to accept any offer less than 12 NOK to be zero. You can have your boys at Pareto bully, bluster and bluff them as much as you would like. They will not accept your offer of NOK 9.3 and your basis of “valuation” is not the sort of story that will convince professionals.

However, what you put in your Mandatory Offer is up to you. You may find it useful to calculate the real costs of a hostile takeover strategy. By my reckoning, it can easily exceed an additional 3-4 NOKs.

Your comments on “fair treatment of Fairstar employees” will be a very hard sell. Perhaps you should rent a room somewhere and prepare a power point presentation. We are happy to inform our Team about the time and place. However, it will be difficult to predict how many people will actually attend. I think you need to accept the fact that many members of our Team have no interest in a career at Dockwise and will leave Fairstar in the coming weeks to pursue other opportunities.

Your views on client management strike me as being rather naive. In spite of the nonsense you have been saying to the market about Fairstar being a “speciality logistics provider” we all know that Fairstar has been awarded contracts for on-shore AND offshore projects at higher rates than were quoted by Dockwise. The combination of our fleet and our Team as well as our close client relationships has given us a consistent competitive advantage whenever we have gone head to head with you. Your “Vanguard Size” egos make it difficult for you to admit this publically. Do you really expect our clients to choose Fairstar in the original Tender, over you, at the time of contract award
and then change their minds because you buy our Company? Are you expecting Fairstar to say warm and wonderful things about Dockwise?

The feedback we have received from clients about your takeover has not been positive. The “change of control” clauses in ALL of our contracts now expose you to the risks of cancellation. Do you expect us to cooperate with you to mitigate these risks? Why? I think the legal expression you should consider is “caveat emptor”. This dilemma highlights the dangers of hostile takeovers. I regret to inform you that a 9.3 NOK offer price does not really inspire a lot of creative cooperation. I hope you understand.

In your letter, you raise a wide range of questions about financial details. As you can see, we have properly prepared accounts and release our figures to the market appropriately. I think you are entitled to rely on these figures as you attempt to estimate the company’s financial position after you have completed your unconditional offer. Once again, I need to point out to you another problem with hostile takeovers. You do not get the opportunity for financial “due diligence”.

Fairstar has ordered an additional vessel from GSI. This has been announced to the market before you made your move. Once you have completed your unconditional offer and have appointed your own group of Directors to the Management and Supervisory Boards of Fairstar, it will be well within their powers as Directors to consider how best to manage their obligations to all Fairstar stakeholders, including GSI. Perhaps if you had not been in such a hurry to launch a hostile takeover, you would have had a better understanding of the risks as well as the opportunities facing you now as a very pregnant, unconditional buyer.

In summary, I think it is a mistake for you to simplify the current situation. Please be assured that we recognize your shareholding, your voting rights, and all of the other benefits you are entitled to under law. You will have the opportunity to vote your shares as you see fit at our AGM. Your votes will all be recognized. I find your sense of paranoia regarding the AGM to be rather curious. What are you so afraid of?

The 20 million share issue was on the Agenda for a good reason. Our 2011 Accounts explain very clearly the consequences to our business if we fail to take delivery of the FORTE in May. To take delivery of the FORTE we may need access to the capital markets. The share placement is one of those tools. If we do not have permission to place the shares, we may not be able to draw on the DNB facility. I would like to encourage you to consider the consequences this will have on the value of your current 54%, as well as the obligation you now have to make an unconditional offer for the rest of Fairstar.

Of course you will be entitled to your pro-rata share of any equity we need to sell. So if that is what you are afraid of, please don’t be. What you should really be very worried about is what will happen if we do not make the payments for the FORTE and FINESSE by May 23. Does this focus your attention? Please read our 2011 Accounts a little more closely.

I think it is in the best interests of the Company to continue with the AGM. Your 54% votes will be fully recognized. If you want to vote everything down, it will only make it more apparent that your motives are those of fools, in which case the final bill may come as an unpleasant surprise.

Time to cooperate?

Kind regards,

FAIRSTAR HEAVY TRANSPORT NV

Philip Adkins
Chief Executive Officer

What’s the approach right now with Fairstar?  Are things getting sorted out with the Fairstar-Dockwise deal?  The last I heard things were “heating up” a bit between the two companies.

Not as far as we’re concerned.  We look at our control to be at over 54 percent, we still have of course a couple of formal position points ahead of us, like our AGM, but we’re confident we are able to explain the business case to our shareholders.

We have put our price forward, and there is a lot of speculation about the remaining 46 percent.

We’ve said we find the 22 percent premium on the value of the stock prior to our offer, to be a decent proposal, and that’s where we are. 

What does Fairstar think they are worth?

I have no idea, you’ll have to ask Fairstar.

Fair enough. 

Moving on… the Dockwise Vanguard was a bit of a feature for you this year at OTC Houston, and your company is planning to do some remarkable things once she’s delivered, such as dry-docking an FPSO while still attached to the buoy. 

A conceptual image showing the Dockwise Vanguard drydocking an FPSO while still connected to the production buoy, image courtesy Dockwise

How long has that concept been considered?

Really, we’ve been looking at this idea ever since we made the decision to build the Vanguard.  The idea behind this vessel is that it serves a couple of market segments.

First of all, we’re looking at the new, big production semis for deep water, because everything is getting bigger, and we’re looking at the potential to transport a fully integrated semi, so it’s not a separate hull, but a hull including the topside.

On Jack & St. Malo, they were just a little bit ahead of us, but if you look at Goliat, which is a fully integrated semi headed to northern Norway, that’s the idea we had when we decided to build it.

Is that one of those cylindrical FPSOs by Sevan Marine?

Yes, that is correct. Recently we have transported the Sevan Brasil, which is a drilling rig of a similar cylindrical shape as the Goliat.

Our next target market are spar buoys.

I think Statoil awarded Dockwise a contract for such a project recently isn’t that correct?

Yes, Aasta Hansteen.  It’s a long spar, and wider than the others we’ve transported in the past. Of the 17 spar buoys that are now installed in the Gulf of Mexico, we’ve transported 15 of them.

Perdido and Tahiti were the last two, but the Aasta Hansteen spar will be of a new generation of spars and a step up. We see new spar buoys targeted for the deepwater projects in the Gulf of Mexico and that’s a major segment we see as an ideal fit for the Dockwise Vanguard.

Our third targeted segment for the Dockwise Vanguard is transporting new builds from the Far East that do not have their own propulsion to either Brazil or West Africa. Then we would look at the transportation, or lifting, of the converted FPSOs.  Considering that there have been about 80 FPSOs in operation over the past 10 years, there is a particular need for this as many are now seeing maintenance issues that will require dry-docking.

Gradually, we have a lot of discussions ongoing with the FPSO owners and the oil companies about new builds and I expect that not too long from now, we’re probably going to sign another deal for the Dockwise Vanguard with one of the FPSOs.

How many contracts do you have signed for the Vanguard already?

We have three contracts at the moment for around $100 million, and the vessel is still under construction.

That’s fairly unique in an industry where everyone is fairly traditional from the beginning.

Well, the Dockwise Vanguard is certainly not a traditional vessel.

Nothing traditional about it indeed.

Recently, we’ve also decided to convert the Black Marlin and make it as big as the Blue Marlin for the near top end of the market, right under the Dockwise Vanguard cargo size.

The Blue Marlin and the Black Marlin were sister ships weren’t they?

We are going to make them sister ships again.

So, maybe I’m missing something, but as sister ships, I would think that both ships would have the same capacity when they were originally built?

They were exactly the same.

So what happened with the Blue Marlin?

We converted the Blue Marlin in 2004 when we signed the Thunderhorse contract with BP, then we converted her to a capacity of 75 thousand tons. Since then, she has been carrying around all these 6th Generation semis, big production units, and that part of the market is going to be so crowded in the next couple years that we decided to upgrade her sister ship.

Going back to the Fairstar deal, because we have decided to convert the Black Marlin, we need another vessel like her to fill in that segment of the market.

The Fairstar deal is significant for us because it is fully complementary to everything else that we do. In the fact that they have the converted barges, FORTE and FJELL, and for our offshore work, those vessels are pretty interesting. The other two vessels are a good addition to the rest of the fleet looking at their size.

What is Dockwise’s role in the Australian Ichthys project? 

The Ichthys project has a couple of components. There is an LNG project, which consists of modules, which is something that Fairstar is partly working on, but before that, the big production unit, which still needs to be built, that’s the unit which will be the largest floating production unit ever built.

The Prelude?

No, no, this will be the integrated semisubmersible that will be built and will be close to 100 thousand tons in weight.  This is something that we are looking at for the Dockwise Vanguard.  Then, there is an FPSO as part of this project, and the LNG systems. All of these projects have a significant magnitude, and most of it is pretty interesting for the Dockwise Vanguard.

Do you foresee building any more of these ships once this one is launched?

Well we take the position that we want to see this one done first. I would certainly like to have the first  three years under contract and then looking at the market, I think there might be a chance that we look at another one.

When will the Dockwise Vanguard be delivered?

Mid-December she’ll be delivered, but she will be in the water by August.

Who is classing this ship?

It’s DNV.

Was there a particular reason you chose DNV over any of the other classification societies?

We have a very strong relationship with DNV for all our vessels, so for a vessel with as much novelty and technology as the Dockwise Vanguard, we find DNV to be the most qualified.

Was this an in-house design?

We came up with the concept, because we knew pretty well what we wanted, essentially a semisubmersible aircraft carrier, and we figured out the basic conceptual design in-house, and then went to Deltamarin in Finland and they worked on it to see if it would work.  A few months later they came back and say we have something you need to see, and we think it’s doable. Here it is.

And how long have you been with Dockwise Andre?

I’ve been CEO since 2003, so almost 10 years now.

What has been the biggest challenge for you as CEO?

The biggest challenge was in 2006 when our parent company, Heerema sold us and we went through full control auction where we had a lot of bidders for our company.  That was 8 to 10 months of very complex negotiations, and the company was finally sold to a private equity firm.

All in all, it has been a really good situation for us ever since and has left us in the position to make a lot of investments and grow the company which has accelerated us in the right direction.

FJELL transports a jackup rig for Saipem, image courtesy Fairstar Heavy Transport N.V.

In what must have been a rather tense meeting this morning, Fairstar Heavy Transport N.V. (FAIR) met with representatives of Dockwise in Fairstar’s Rotterdam Headquarters to discuss the unsolicited acquisition offer they received from Dockwise yesterday.

At this meeting, Fairstar provided Dockwise with factual materials, including details about its future order book, which demonstrate that the true value of Fairstar is significantly higher than the conditional offer of NOK 9.3 per share. Fairstar calculated the replacement cost of the current fleet, the EBITDA contribution of the various contracts in place for both onshore and offshore energy infrastructure projects, as well as the immediate benefits the conditional proposal would bring to Dockwise shareholders.

Fairstar has made it clear to Dockwise that in the absence of a properly valued, unconditional offer for all of the outstanding shares in Fairstar, the conditional and opportunistic offer made by Dockwise will escalate into an increasingly hostile stalemate.

Fairstar Heavy Transport N.V. (FAIR) has appointed ABG Sundal Collier and SEB Enskilda to act as financial advisors to the Company.

Fairstar's Forte heavy lift transport ship underwent submerge trials late last week, image: Fairstar

Fairstar Heavy Transport N.V. (FAIR) announced today that they have received an unsolicited, conditional, offer from Dockwise to acquire Fairstar shares at a purchase price of NOK 9.3 per share.

The Joint Supervisory and Management Boards of Fairstar have met this evening and concluded that the conditional offer for Fairstar shares significantly undervalues the business and recommends to Fairstar shareholders NOT TO ACCEPT the conditional offer from Dockwise. The Board is aware that a number of shareholders have been solicited by Dockwise to enter into a conditional agreement at the current offer price and cautions shareholders to consider that accepting such an arrangement may limit their opportunities to accept an alternative proposal at a higher offer.

In their press release this morning, Dockwise’s Chief Executive Officer, André Goedée, said:

“The proposed acquisition of Fairstar, and the integration of their four vessels into our fleet significantly accelerates progress towards our strategic objectives. Fairstar’s growing position in downstream processing projects, including LNG module transportation developments such as Gorgon and Ichthys, is highly complementary to Dockwise’s existing market strengths. The transaction powerfully enhances our ability to provide our clients throughout the Oil & Gas industry with the diverse and project specific services they require. Next and of equal importance is the fundamental increase in size of Dockwise, reinforcement of its balance sheet and increased earnings potential. An important step forward at the right time.”

Fairstar considers the Dockwise offer to be opportunistic and overlooks a number of significant aspects of Fairstar’s business, notably the replacement cost of the Fairstar fleet, the value of Fairstar’s order book and the reputation Fairstar has established as a provider of high value marine transportation services for energy infrastructure projects involving the world’s major energy and EPC Companies.

Philip Adkins, Chief Executive Officer of Fairstar, stated on behalf of Fairstar,

Fairstar has demonstrated remarkable success building an order book of almost USD $300 million with a modern, four vessel fleet. We have been awarded a series of high value, multi voyage contracts for energy infrastructure projects for on-shore LNG, as well as off-shore field developments. In every single contract award, we have competed against Dockwise and won. The Fairstar “Red Box Strategy” has built the foundation of a business that has clear, sustainable returns to Shareholders for the next five years. The Dockwise offer is a clear confirmation of their failure to compete at the high value segment of the market. It is no surprise that they would try to capture the benefits of high value, multi voyage contracts by trying to buy our company. However, the conditional nature of their proposal as well as the significant discount to the true value of Fairstar that they are offering should be treated with suspicion by shareholders. Consolidation in the marine heavy transport industry is not limited to the potential combinations the market is now aware of. After the Dockwise offer was published on the evening of April 22, Fairstar has been contacted by a number of shareholders who have informed us that they will not accept the conditional offer and have encouraged management to explore alternatives that will realize a more appropriate level of value for the company.

Image: Dockwise

Dockwise announced today their decision to convert their Type 2* heavy lift vessel, the Black Marlin, to a Type 1 vessel similar to its sister ship, the Blue Marlin.  Conversion will lift the Black Marlin’s carrying capacity from 56,000 to 76,000 tonnes.

Dockwise Vanguard, rendering courtesy Dockwise

Statoil has just awarded Dockwise a $57 million contract to tackle this project with the Dockwise Vanguard, a new super transport ship that will carry the Aasta Hansteen spar offshore Norway from a shipyard either in Korea or Finland in 2015.

The Vanguard will be an extremely capable vessel with a cargo deck 275 meters long capable of lifting 100,000 tons.  This is the third contract booked so far for this vessel in recent months.  Last October, Dockwise announced they had won a contract to deliver the Goliat FPSO from Korea to Norway on board this vessel.

Additional Dockwise contracts for other clients comprise the transport of four drilling rigs to Rotterdam, Saudi Arabia and Singapore (all for H1 2012) and a single load of barges to Brazil in Q2 2012.

André Goedée, Chief Executive Officer of Dockwise, commented: “These contract wins, particularly a double rig cargo on the Black Marlin from Singapore to Rotterdam, are further proof of the rise in activity levels in oil & gas exploration seen since the end of 2011.

Dockwise's Black Marlin, image courtesy Dockwise

The contract win for Dockwise Vanguard underlines our clients’ recognition by of the advantages of a vessel of the scale and capacity of Dockwise Vanguard. Spar buoys were an asset class that we identified as potential for this vessel and consequently I am excited that the Aasta Hansteen spar buoy contract is the first to materialize of those prospects we are discussing with clients for the post 2013 period.

We are actively pursuing several short term business opportunities and as before actively tendering for T&I projects in various important regions.  As a result we are confident of further increases in backlog in due course.”

The new semi-submersible is currently under construction at China Merchants Yard in Shenzhen and is due for delivery by the end of March 2012. At 222 metres in length and deadweight of 53,500 tonnes, the vessel will be capable of carrying loads of up to 50,000 tonnes.

Dockwise said it will operate the vessel under a management contract in close cooperation with COOEC as part of the Dockwise fleet of semi submersible vessels. Dockwise will be responsible for marketing the vessel and will also be training the permanent crew.

Speaking at the signing ceremony, at the the Marintec convention in Shanghai, Andre Goedee, Chief Executive, Dockwise, said:

“This is an innovative arrangement which brings distinct benefits for both COOEC and Dockwise. COOEC will engage the world’s leading heavy marine transport firm to secure profitable cargoes for their vessel and Dockwise gains access to further, premium, new-build resource for our own clients as demand in the sector moves into rapid growth,” said Andre Goedee, Chief Executive of Dockwise while at the Marintec convention in Shanghai.  “COOEC’s vessel will complement our own fleet capacity during a phase of accelerated offshore project installation and development.”