MMA Offshore fields $1bn takeover offer from Singaporean fund

A $1bn takeover offer for marine services provider MMA Offshore undervalues the company, a major investor says.

MMA Offshore is one of the largest marine service providers in the Asia Pacific region.

MMA investors are split on the merits of a $1.03b takeover bid lobbed for the company on Monday, with Pendal Group saying the company has a solid economic moat which should be used to extract more value.

The MMA board has unanimously backed the $2.60 per share offer from infrastructure firm Seraya Partners, which wants to use the offshore marine services firm to grow its wind business.

But while there is broad agreement that managing director David Ross and chief financial officer David Cavanagh have done a stellar job turning the company around over the past three and half years, Pendal portfolio manager Lewis Edgley said with a high barrier to entry for offshore marine services, the price looked cheap.

“Dave Ross and Dave Cavanagh have done a great job of bringing the business back from a very near death experience,’’ Mr Edgley said.

“They’ve navigated that exceptionally well, but the reality is, if you look at the replacement value of these assets - that’s essentially what this bid is paying, or attempting to pay - and when you look at the supply constraints, and the ability to be able to bring new vessels to market in any sort of reasonable timeframe, the reality is if you are wanting to acquire a full portfolio of assets that can do what these guys can do, surely the maths is that that needs to exceed the replacement value of them.

“That’s kind of my starting point. I don’t think the current bid represents fair value.’’

Mr Edgley wouldn’t be drawn on what a fair price for company would be.

Shareholders have done exceedingly well over the past couple of years, with MMA raising money at 30c per share in late 2020, with the money used to restructure debt and expand into new sectors such as offshore wind.

The stock closed at $2.60 on Monday.

Aitken Mount Capital Partners’ Angus Aitken said $2.60 per share was a “great price ... and is all due to the hard work of Dave Ross and Dave Cavanagh who fixed this business from the tougher times and grew its presence in renewables to the point where a fund is buying the company as an infrastructure asset.’’

Mr Aitken said shareholders “should be sending crates of nice wine to the two Davids who run it’’.

Citi analyst James Byrne, in a note to clients released early this month, put a $2.60 price target on MMA.

Citi said it expected MMA Offshore’s earnings to peak at $91m in FY 2026, at roughly quadruple core earnings in FY 2023.

“All tides recede,” Mr Byrne said. “However, the diversification of revenue, a comparatively younger and more sophisticated fleet, a healthy balance sheet and potentially adding length to the contract book would reduce risks to equity versus prior cycles.”

Seraya is making the bid through its subsidiary Cyan Renewables, with the offer priced 11 per cent higher than the company’s previous closing price.

MMA said in a statement to the ASX on Monday that Cyan “intends to retain MMA’s workforce and to utilise and grow MMA’s expertise, assets and operating model to expand further into offshore wind support services while continuing to provide a comprehensive suite of marine and subsea services to its existing clients in the offshore energy and wider maritime

industries’’.

The MMA board has unanimously backed the proposal subject to an independent expert’s report and in the absence of a superior offer.

Chairman Ian Macliver said the board had been in talks with Cyan since October, “and the board has now reached the required level of confidence to enter into the scheme implementation deed’’.

“There has been increased interest in MMA as our strategy to diversify our operations and deleverage the business, together with our improved earnings, has seen the share price rise more than 80 per cent over the past five months,’’ he said.

“The MMA board believes that the scheme is in the best interests of shareholders, providing certainty in the form of a cash payment to shareholders while removing the risks associated with operating in a cyclical industry.

“MMA provides Cyan with exposure to Asia and, importantly, Australia as Cyan pursues equity investment to create a leading global energy transition-focused offshore marine business.”

The takeover deal would require sign off from the Foreign Investment Review Board as well as approval from MMA shareholders, with a meeting likely to be held in late June or July.

To succeed the scheme will need the support of 75 per cent of votes cast at that meeting.

Cyan Renewables is headquartered in Singapore and says it is Asia’s first dedicated offshore wind vessel operator.