Fincantieri Drops $455 Million in “Desperately Needed” Cash for STX OSV

Fincantieri SpA agreed to buy a controlling stake in STX OSV Holdings Ltd., the world’s biggest maker of oil-rig support vessels, for 455 million euros ($600 million) as rising energy demand stokes offshore drilling.

The Italian state-controlled shipbuilder will pay S$1.22 a share in cash for STX Group’s 51 percent holding, according to a statement today. It offered to buy out minority shareholders at the same price. OSV fell 7.1 percent to S$1.30 in Singapore trading, as the offer is at a discount to yesterday’s close.

Fincantieri, the world’s biggest builder of cruise ships, will get yards for making offshore vessels in Europe, Asia and Brazil as energy companies increase drilling in deeper waters to replenish reserves. The deal also boosts STX Chairman Kang Duk Soo’s efforts to raise 2.5 trillion won in asset sales as his South Korean group seeks funds to repay debt.

“This means cash, which STX desperately needs to survive,” said Richard Park, an analyst at Korea Investment & Securities Co. in Seoul. “Still, the sale price is disappointing as the market was expecting something close to the trading price.”

The deal should help improve STX’s finances, the group said in a separate e-mailed statement. STX Corp., its holding company, rose 2.4 percent to 8,560 won at the close in Seoul. Affiliate STX Offshore & Shipbuilding Co. climbed 2.3 percent.

Costa Concordia

Fincantieri, which built the stricken Costa Concordia liner, offered to buy out minority investors in OSV because of Singapore takeover rules. Acquiring all of the Alesund, Norway- based company would cost about 900 million euros, according to the statement. The general offer will probably be largely rejected because of the discount, said Jason Saw, an analyst at OSK Research in Singapore.

“We view the offer as unattractive to minority holders,” he said in a note today. Och-Ziff Capital Management Group owns 12 percent of OSV, according to data compiled by Bloomberg.

Fincantieri, based in Trieste, will pay for the purchase using internal resources and a syndicated loan provided by lenders including Banca IMI SpA, BNP Paribas SA, Banca Carige SpA, Unicredit SpA and Cassa Depositi e Prestiti.

The acquisition is expected to be completed within the first four months of 2013, according to the statement. Credit Suisse AG and Nomura Holdings Inc. are advising on the deal.

STX Debts

Kang, who founded STX in 2001, is also seeking to sell stakes in a shipping unit and a Chinese shipyard to ease a cash crunch. His three main companies — STX Pan Ocean Co., STX Corp. and STX Offshore — have $1.4 billion of bond and loan due next year, according to data compiled by Bloomberg.

The group is struggling for funds after opening the Chinese shipyard in 2008, just before a collapse in demand for new vessels caused by a shipping glut and slower growth in China. Ship orders at the nation’s yards tumbled 47 percent from a year earlier in the January-November period to the least since 2003, according to shipbroker Clarkson Plc.

Fincantieri won 1.86 billion euro of orders last year, 2.6 percent less than in 2010, according to its annual report. Its backlog stood at 5.37 billion euros at the end of December. It had net income of 10 million euros in 2011, compared with a loss of 124 million euros a year earlier.

OSV Backlog

OSV won 8.23 billion kroner ($1.5 billion) of new contracts in the first nine months, 62 percent more than a year earlier. Its order book stood at 16.4 billion kroner at the end of September, with deliveries stretching into 2016, an increase from 13.6 billion kroner a year ago. Third-quarter net income fell 19 percent to 228 million kroner because of delays in projects at its shipyard in Brazil.

The company is building a second facility in the South American nation as Petroleo Brasileiro SA drills new wells off the country’s coastline. Globally, deep-water explorers will spend a record $232 billion on new equipment over five years, according to Canterbury, U.K.-based researcher Douglas-Westwood.

STX bought OSV through the 1.4 trillion won acquisition of Aker Yards ASA, which was completed in February 2009. The group sold a 32 percent stake in the unit, renamed STX OSV, in a S$257.3 million Singapore initial public offering in 2010. STX retains cruise-ship building yards acquired in the Aker deal.

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