Catalist-listed EMS Energy said it plans to merge with engineering, procurement and construction management firm Koastal Group in a cash-and-scrip deal valued at $150 million to diversify its earnings stream.
The enlarged group will become an integrated offshore and marine (O&M) services provider which can provide manufacturing and fabrication for larger and higher-value projects.
EMS Energy announced last Friday after the market closed that it had entered into a non-binding memorandum of understanding to acquire an investment holding company which will hold Koastal and its subsidiaries. Koastal Industries is a controlling shareholder of EMS as it has a 33.46 per cent stake in EMS.
EMS and Koastal Group have worked closely since 2010, leveraging on their different services and strengths to tender for and implement larger marine, oil and gas projects.
"The proposed merger will allow EMS to scale up the value chain more aggressively, improve efficiencies, diversify its revenue streams and capture higher-margin, larger-scale projects," EMS said in a statement.
Shares of EMS rose 0.2 cent, or 8.7 per cent, to 2.5 cents yesterday.
Koastal is owned by Mr Ting Teck Seh and Mr Ting Teck Jin, who is EMS executive chairman and CEO and also its biggest shareholder with a stake of 33.46 per cent. EMS will pay $24.3 million in cash to Mr Ting Teck Jin and Mr Ting Teck Seh and the company will issue $125.7 million worth of new shares at 34.5 cents each.
Koastal Group was valued at US$143.1 million (S$191 million) by an independent valuer, Jones Lang LaSalle Corporate Appraisal and Advisory.
It recorded revenues of $93.1 million and a net profit of $14.3 million for the financial year ended Dec 31, 2014.
Ahead of the merger, EMS will first consolidate its shares on the basis of every 15 existing shares to one consolidated share, which will reduce its share capital base from about 1.48 billion to around 98.71 million.
Koastal Group will undergo a restructuring exercise that will include the disposal of its equity interest in EMS, NVS Holdings, NVS (Singapore), and Nosco-Vinalines Ship Repair Company.
This article was first published on April 28, 2015.
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