Thursday, May 19, 2011

(Adds details, updates share prices and adds analyst comments in the 14th and 15th paragraphs) 


 
   By Iain Packham 
   Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Sharjah-based oil rig engineer Lamprell PLC (LAM.LN) said Thursday its $336.1 million acquisition of Norwegian-listed firm Maritime Industrial Services Co. (MIS.OS) will give it greater manufacturing capacity, access to new markets and make it one of the biggest players in the Middle East.

At 1321 GMT Lamprell shares were trading 37.2 pence or 11% higher at 388.5 pence, as the market reacted positively to the transaction details.

Lamprell said the acquisition, which will see it enter the onshore rig market, will be primarily funded through a rights issue and a loan facility.

It will raise GBP139.4 million from a three-for-ten fully underwritten rights issue, priced at 232 pence apiece.

The $150 million loan facility will be fairly short term, Chief Executive Nigel McCue told Dow Jones Newswires as, "the strategy of the company has always been to have zero debt."

He expects the debt to be paid off when Lamprell completes and sells one of Maritime Industrial's assets, a jack-up rig called Hull 108. He anticipates construction of the rig to be completed in the first quarter of 2012 at a cost of around $30 million. McCue expects around $160 million from the sale of the rig, comfortably offsetting the debt.

The acquisition gives the company access to the onshore rig market--as yet untapped by Lamprell--as well as increasing its rig offering.

"We build Le Tourneau, we can now offer Friede and Goldman as well, which are the two main rig designs in the world," McCue said.

The purchase also adds capacity. Middle East-based Maritime Industrial has 356,000 square meters of capacity at its ship yards. Following completion, Lamprell will have around 890,000 square meters with 2.2 kilometers of quay side, the CEO said. "That's very important, it makes us one of the biggest players in the region," he added.

The acquisition comes at a good time for Lamprell which is increasing its workforce by around 1,500, taking it to almost 10,000, to take advantage of an uptick in demand for newbuilds and rig refurbishments, McCue said.

"The return on invested capital in the first full year of ownership will at least match Lamprell's cost of capital and exceed it thereafter," Lamprell said in the statement.

Despite agreeing to buy the firm for $336.1 million--slightly less than a third of Lamprell's market capitalization--it still has an appetite for more acquisitions.

"We're keen to expand the company. We'll be looking to digest and integrate this acquisition, but going forward we would be keen to look at other potential acquisitions," McCue said.

The $336.1 million price tag is based on a Maritime Industrial share price of NOK38 apiece. At 1250 GMT, the company was trading 25% higher at NOK37.6 a share.

Faraday Research analyst David Lowery said the acquisition will add a number of established businesses in target geographies, an enlarged customer base with a wider service offering and will generally consolidate Lamprell's position as a regional market leader in the rig market.

There is every reason to buy Lamprell at current levels in anticipation of steady and continuing growth, he added.

Lowery has a "buy" rating on the stock and a three month price target of 435 pence.

-By Iain Packham, Dow Jones Newswires; 44-20-7842-9269; iain.packham@dowjones.com

(END) Dow Jones Newswires

19-05-11 1328GMT