Vard receives privatisation offer from Fincantieri

Here's why $0.24 cash offer is reasonable.

Fincantieri S.p.A., which currently holds a majority stake of 55.63% in Vard, has announced a Voluntary Conditional Cash Offer for the remaining shares in the company at an offer price of S$0.24 in cash.

The offer is conditional upon Fincantieri having received sufficient acceptances that result in it holding more than 90% of Vard’s total shareholdings at the close of the offer.

Fincantieri’s intention is to de-list Vard from the SGX if the offer is successful. The official offer document will be dispatched to Shareholders between 14 to 21 days from the 14th of November (announcement date), and the offer will remain open for a period of at least 28 days from the posting of the offer document.

DBS Vickers Securities believes the offer is fundamentally attractive as Vard’s medium-term outlook remains uncertain.

The research house views that Vard’s order wins from its new target segments (exploration cruise vessels, acquaculture vessels, patrol vessels, offshore wind service vessels, hull sections etc.) are unlikely to make up for the demand shortfall from the OSV newbuilding market, going forward.

Vard’s order wins year-to-date (YTD) totalling ~NOK10.1bn look impressive at first glance, but we are cognizant of the fact that over 60% of this is derived from six expedition cruise vessels –which is a niche market, where newbuild demand may not be sustainable. Thus order win momentum from this segment is unlikely to repeat in FY17/18, it said.

"Stripping out this, order intake YTD stands at c.NOK3.9bn – higher than the NOK3.5bn recorded in FY15 but well below historical levels of NOK9-14bn annually, as Vard’s traditional bread and butter OSV newbuild market remains moribund with the fall in oil prices," DBS Vickers Securities explained.

DBS noted that other new target segments have yet to show significant momentum, thus engendering a lacklustre order win outlook, which offers limited revenue and earnings visibility past FY18 as the current orderbook is depleted.