Dubai Drydocks World offered on Monday to buy Singapore's Labroy Marine for around $1.63 billion as interest in rig-building assets heats up amid record oil prices.
Dubai Drydock's offer of S$2.8425 cash per Labroy share works out to about 15 times the company's 2008 earnings per share, based on the average estimate of nine analysts polled by Reuters Estimate. The offer price represents a premium of 3.4% over Labroy's closing price of S$2.75 on Friday.
The state-owned Middle East company has irrevocable undertakings from holders of 65.49% of Labroy's shares, including the Singapore company's chairman Tan Boy Tee, Labroy said in a statement.
If completed, the acquisition will be Dubai Drydock's second in Singapore after its successful bid of $424 million for a 70% stake in shipyard operator Pan-United Marine. The firm has since lifted its stake in Pan-United above 90% and taken it private.
Demand for rigs and vessels required to drill offshore oilfields has increased in recent years thanks to soaring crude oil prices, which hit a record over $93 a barrel on Monday.
Singapore's Keppel, the world's largest offshore rig builder, last week posted a 23% rise in third-quarter net profit and said its order book stood at a record S$11.1 billion - enough to keep its yards busy until 2010.
Labroy trades at a forward price-earnings ratio of 14.47 times, according to Reuters Knowledge, compared to Keppel's 18.45 times.
"The acquisition of Labroy has marked yet another milestone for Drydocks World in consolidating its position worldwide," the Middle East company said in a statement.
Bankers told Reuters earlier this month that Dubai Drydocks was planning to borrow as much as $2 billion to fund expansion.
Dubai Drydocks World belongs to state conglomerate Dubai World, parent of port operator DP World, which acquired British rival P&O last year, and private equity firm Istithmar, which bought a stake in Standard Chartered in 2006.
Labroy's share price has risen 46% since the start of the year, beating the Singapore's Straits Times Index's 28% gain.
Singapore-based traders said Dubai Drydocks' offer may not be sufficient to entice minority holders to sell.
"It's surprising because market expectations were that they [Labroy] won't sell for below S$3.00 per share," a dealer with a local brokerage said.
Most analysts polled by Reuters Knowledge have a buy or outperform rating on the company, with Morgan Stanley setting a target price of S$3.40 per Labroy share.
Labroy chairman Tan said in an interview published in the Edge newspaper last week that he would sell his shares in Labroy if someone offered the right price. "I will take the money, enjoy my life [and] relax," he said. - Reuters
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