Tuesday, January 17, 2012


STX OSV: DMG gives its thoughts on the potential sale of STX OSV by its parent.
House note that based on share price of $1.355/share , potential buyers have to fork out roughly $811m for the 50.75% stake from STX Grp, and $320m for Och-Ziff's stake if they decide to cash out of this. Recall that Och-Ziff took the 20% stake at $1.33/share in Jul 2011.

Analysis shows that not many buyers have that kind of firepower to make a takeover offer for STX OSV. By buying out the 51% stake in STX OSV, the potential buyer will be required to make a mandatory general offer for all the remaining shares, which could come up to more than $1.6b.

At this juncture, house have no idea what the price nor the structure of the deal is, but clearly in this mkt conditions, not many buyers can afford the big price tag to takeover STX OSV. Which leads to the question of price. At what price will STX Group be willing sell STX OSV? As a reference, STX Group has sold down some of its own shares at $0.79/share during the IPO and 20% stake to Och-Ziff at $1.33/share.

House best guess is that the price could range between $1.30/share to $1.50/share (STX Group clearly can sell at lower prices, but Och-Ziff's stake may have set a floor price to this).
Add that Keppel and SMM have the right balance sheet to make a takeover of that size, and potential fit e.g product range, culture on R&D, governance, Brazil expansion etc. However, not very sure if they are keen to do it unless price is really low.

Still believe STX OSV is worth more in the long run when order flow turns bullish again (maybe 2H12 or 2013), but for now, the stock faces parent shareholder uncertainties and challenging six months to fill their 2012 capacity.

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