Singapore Technologies Engineering (ST Engineering) announced that its subsidiaries have entered into an agreement to divest the entire issued and outstanding equity interests in its US Marine subsidiaries, VT Halter Marine and ST Engineering Halter Marine and Offshore (STEHMO) to Bollinger Shipyards Lockport for a cash consideration of US$15 million ($21 million).
In addition, ST Engineering may receive earnout payments post-closing of up to an aggregate amount of about US$10.3 million, subject to the award of certain future shipbuilding contracts to Halter Marine and such contracts meeting the requisite operating profit margins.
ST Engineering has been undertaking regular portfolio review and rationalisation to ensure that it focuses on businesses that are strategic and which yield higher returns.
Despite the divestment, ST Engineering maintains that its marine business in Singapore remains "core and strategic".
The group conducted a thorough review of these two US marine businesses. These two business units have incurred a combined net loss before tax of US$256 million in the last five years (2017-2021), with an annual net loss before tax that ranged from about US$40 million to US$60 million.
This review resulted in the engagement of financial advisor Macquarie Capital to conduct an auction process involving both strategic investors and private equity funds. The process culminated in the selection of Bollinger as the most suitable purchaser, taking into consideration their good reputation and strong track record in undertaking US Navy and US Coast Guard programmes.
Additionally, as a designer and builder of high-performance vessels, the group believes that Bollinger has the capability and resources to add value to both businesses’ programmes, including the Polar Security Cutter. Bollinger, the largest privately-owned and operated shipbuilder in the US, is principally engaged in the design, engineering and construction of complex, high endurance US Coast Guard and US Navy vessels, research vessels and offshore oil field support vessels and tugboats, amongst others.
The order book of these two US Marine businesses was $1.9 billion at the end of September. The value of the order book of these two businesses will be removed from the group’s order book at closing. The group’s order book remains strong at $25.0 billion at the end of September.
The proposed divestment is expected to result in a loss on disposal, which is non-cash in nature, of approximately $13.3 million. It is expected to be completed before the end of December, subject to certain closing conditions.
Vincent Chong, group president & CEO of ST Engineering says: “We have experienced challenges and losses in the past years operating the two US shipbuilding and ship/rig repair businesses. After a thorough review of strategic alternatives, we made this difficult decision to exit the US Marine business. We believe that this proposed transaction represents a favourable outcome for ST Engineering shareholders, Halter Marine and STEHMO as well as their stakeholders.”
“The addition of Halter Marine and STEHMO is strategic as it further strengthens our position in the industry and US defence industrial base by allowing Bollinger to expand our footprint, capabilities and suite of innovative solutions that we can provide to our government and commercial customers,” says Ben Bordelon, CEO and President of Bollinger Shipyards.
Shares in ST Engineering last traded at $3.33 on Nov 4.
Photo: The Edge Singapore/ Albert Chua