Great Offshore bidding war on as ABG hikes offer

Written by fe Bureau | Mumbai | Updated: Jul 31 2009, 05:30am hrs
There seems to be no end to the bidding war for acquiring a stake in Great Offshore. ABG Shipyard hiked its stake in Great Offshore to 7.3%, increasing the offer price to Rs 450 from Rs 375 through a series of block deals on Wednesday, buying 5.3% stake. ABGs current price is 11% more than Bharatis offer for the company.

However, the industry experts are still backing Bharati Shipyard as they feel that Bharati which already owns 19.5% of Great Offshore will match up to the price and revise their current price of Rs 405. Moreover, of Bharatis unexecuted order book, orders from Great Offshore amount to 25% or close to Rs 300-350 crore.

However, no information could be gathered from Bharati regarding when there would be a price hike. The two companies have time till August 24 to change their offer price.

Though there are speculations that the price could go up to somewhere around Rs 500 a share, according to industry analysts a fair value for the deal will be difficult to predict. Moreover it will also depend on how much the companies are willing to invest. But the view is that the bidding war would be quite intense.

Bharati still has a stronger position as it has around 19% stake in Great Offshore. There is every possibility that Bharati will match up to the price. At this point it seems that the bidding for gaining a controlling stake in Great Offshore will lead to an increase in the price of acquisition for Bharati, commented an industry analyst. Moreover it also depends on how willing these companies are in acquiring Great Offshore and to which extent they are comfortable in stretching the bidding competition, as Great Offshore will add value to both the companies, he added.

The rise in prices of oil and the shortage of basic equipment such as rigs, supply vessels caused a huge spike in prices and inflated the market valuation of these firms.

Though the prices have now come down due to the fall in crude prices, both Bharati and ABG feel that offshore oilfield services present an attractive business opportunity. Purchase of Great Offshore will also make either of the two companies more integrated as they make the ships and supply vessels that are used by offshore oilfield firms.

ABG Shipyard had invested around Rs 90 crore to buy Great Offshore shares on Wednesday while Bharati Shipyards investment so far is estimated at Rs 250 crore. Moreover, ABG has a surplus cash position of about Rs 400 crore, and the company is also utilizing internal accruals. ABG is also planning a qualified institutional placement to raise Rs 450 crore for which it has already obtained shareholder approval.

We have got a funding of Rs 310 crore from IL&FS. We also have our own funds, Dhananjay Datar, chief financial officer, ABG Shipyard has said earlier.