SGX-ST questions acquisition price of loss-making Deltamarin

SGX-ST demanded that AVIC International Investments explain how the purchase consideration was arrived at.

“We note that Deltamarin is loss-making for FY2011. In this regard, please elaborate on the factors taken into consideration to arrive at the purchase consideration of €32,109,348 for the proposed acquisition,” asked SGX-ST.

Here is the company’s response:

The Aggregate Consideration was arrived at after arm’s length negotiations between the Company and the Vendors and agreed on a willing-buyer and willing-seller basis, taking into consideration the technical knowledge and experience that the professionals of Deltamarin will bring to the Group, the future business potential of Deltamarin as a member of the Group as well as the operational synergy and cost savings brought along by the Proposed Acquisition.

The Proposed Acquisition is a competitive bidding deal where an auction was undertaken by the Vendors. The Company wishes to highlight that it is of the intention to carry out this Proposed Acquisition as a long term strategic investment, and the Proposed Acquisition represents a key step forward in the Company’s goal to develop the Group as a comprehensive dominant player in the global shipping industry.

Deltamarin provides design, engineering and contracting services for offshore, shipping, shipbuilding, naval and marine industries. Its customers include shipyards, offshore companies, ship-owners and operators, and suppliers of marine equipment, system and services.

Deltamarin has a management team of 24 persons who are also shareholders. All of them take up key management position in the operation of the company, and many of them have been with the company for over 10 years. Deltamarin has more than 400 employees, with approximately two-third of them being professionals engaged in the design, engineering and contracting services for offshore, shipping, shipbuilding, naval and marine industry.

As disclosed on pages 100 and 101 of the Company’s information memorandum dated 10 August 2011, the Company has undertaken to consolidate of all existing shipbuilding business within two years of the Company’s listing. The Proposed Acquisition of Deltamarin would enable the Company to acquire ship-design capabilities.

As already mentioned in Section 3 of the Announcement, Deltamarin, established in 1984 with a global clientele, specialised in providing design, engineering and contracting services for the marine industry. With its strong research and development capability, Deltamarin is an experienced developer of profitable, sustainable and energy efficient concepts vessels. In view of this, the Proposed Acquisition will allow the Group to tap on Deltamarin’s expertise, inter alia, in ship design and concept development and therefore establish the Group’s own design capability.

Upon the completion of the Proposed Acquisition, Deltamarin will become a major ship designing arm of the Group.

In addition, the Company is also seeking further opportunities around the world to acquire thirdparty shipbuilding companies with niche strengths and competitive advantages. With the gradual establishment of the shipbuilding and ship-design capabilities, the Company intends to build up comprehensive service capabilities in the shipping industry.