KKR to acquire all shares of Ocean Yield For $829 Million
Octopus Bidco AS (currently under name change from WR Start Up 418 AS) (“Octopus Bidco” or the “Offeror”), a company indirectly wholly owned by funds advised by Kohlberg Kravis Roberts & Co. L.P. and its affiliates (“KKR”), has reached an agreement with Ocean Yield ASA (“Ocean Yield” or the “Company”), the Oslo Stock Exchange-listed ship owning company (OSE ticker: OCY), to launch a recommended voluntary cash tender offer (the “Offer”) for all outstanding shares (the “Shares”) of the Company.
A cash consideration of NOK 41.00 will be offered per Share, subject to certain adjustments as described below (the “Offer Price”). The Offer Price implies a total consideration for all the Shares of approximately NOK 7.2 billion (based on 175,286,575 Shares outstanding as per 13 September 2021).
The Offer is the result of a strategic process related to the Company. The independent members of the Company’s board of directors (the “Board”) unanimously recommend the Offer. Aker ASA (“Aker”), the largest shareholder of the Company through its subsidiary Aker Capital AS, owning 61.65 per cent of the outstanding Shares in the Company, has irrevocably undertaken to accept the Offer on the first day of the offer period.
Vincent Policard, Partner and Co-Head of European Infrastructure at KKR, comments:
“We have been impressed by what Ocean Yield’s management team and employees have achieved since the Company was formed a decade ago through the strategy of investments in modern fuel-efficient vessels on long-term charters. KKR is excited at the idea of becoming a strategic partner to Ocean Yield’s management team to continue building a leading ship-leasing company to the benefit of all stakeholders, including by providing improved access to long-term capital to meet the substantial investment needs of the sector.”
Øyvind Eriksen, President and CEO of Aker, comments:
“Aker has been the driving force behind the development of Ocean Yield since it established the company in 2012. The company has since 2012 grown its fleet significantly from 3 to 63 vessels and is today positioned as a leading maritime leasing company with a strong backlog towards solid counterparties and a highly competent management team. As an industrial investment company, Aker is constantly reviewing strategic options related to its investments and has now decided that it is time to let a new owner continue the growth journey. We are happy to see that a renowned investment firm such as KKR recognizes the strength of Ocean Yield and will support the further growth of the company as the new owner.”
Lars Solbakken, CEO of Ocean Yield, comments:
“We are pleased that KKR, a leading global investment firm with a strong track-record in successful partnerships, is becoming a strategic partner to us to further strengthen Ocean Yield as a leading maritime leasing company. By leveraging KKR’s capital, expertise and network, Ocean Yield will be well positioned to develop the business with the intention to build a substantially larger company. The team is excited for the next phase of developing Ocean Yield.”
Key terms of the Offer
Under the Offer, the Company’s shareholders will be offered NOK 41.00 per Share to be settled in cash upon completion. The Offer Price implies:
A premium of 26.0 per cent to the closing price of the Shares on the Oslo Stock Exchange on 10 September 2021 of NOK 32.54.
A premium of 36.7 per cent to the volume weighted average share price adjusted for dividend during the last six months up to and including 10 September 2021 of NOK 30.0.
The Offer Price will be (i) reduced by the amount of any dividend or other distributions made or declared by Ocean Yield with a record date after 12 September 2021 and prior to settlement of the Offer and (ii) increased with any incremental sales price received by the Company for the FPSO Dhirubhai-1 (the “FPSO”) above USD 19 million if the FPSO is agreed to be sold prior to settlement of the Offer as further described below under the heading FPSO Price Adjustment.
The complete terms and conditions of the Offer will be set out in an offer document (the “Offer Document”) to be sent to the Company’s shareholders following review and approval by the Oslo Stock Exchange pursuant to Chapter 6 of the Norwegian Securities Trading Act. The Offer Document is expected to be approved during September 2021, in order for the offer period to start no later than 4 October 2021. The Offer may only be accepted on the basis of the Offer Document.
As further detailed and specified in the Offer Document, completion of the Offer will be subject to fulfilment or waiver by the Offeror (in its sole discretion, except for conditions (2) and (6) below which require agreement between both parties to waive) of the following conditions: (1) Valid acceptance of the Offer by shareholders of the Company representing 61.65% or more of the issued and outstanding share capital and voting rights of the Company on a fully diluted basis, such condition having already been fulfilled through the irrevocable undertaking by Aker Capital AS to accept the Offer; (2) All permits, consents, clearances and approvals required for closing of the Offer from the Norwegian Competition Authority, the German Federal Cartel Office and the Hellenic Competition Commission having been obtained without conditions or on conditions as further agreed; (3) The Company’s Board not, without the Offeror’s prior written consent, having withdrawn its recommendation of the Offer; (4) The Company and its relevant subsidiaries having obtained consents required from creditors under its bank financing agreements for the purposes of waiving any right of prepayment or termination that would otherwise arise as a result of the Offeror acquiring all or any of the shares in the Company, in accordance with terms to be further set out in the Offer Document; (5) No material adverse change having occurred with respect to the Company and its subsidiaries, subject to exceptions to be further set out in the Offer Document; (6) No governmental interference hindering consummation of the Offer in accordance with its terms; (7) No changes to the Company’s share capital, number of shares issued and/or the par value of the shares having been resolved or completed and (8) The Transaction Agreement (as defined below) not having been terminated in accordance with its terms.
The Offer is otherwise not subject to any financing or due diligence conditions.
If, as a result of the Offer, the Offeror acquires and holds more than 90 per cent of the total issued share capital of the Company representing more than 90 per cent of the voting rights in the Company, the Offeror intends to carry out a compulsory acquisition of the remaining Shares in the Company. Also, if, as a result of the Offer, a subsequent statutory mandatory offer or otherwise, the Offeror holds a sufficient majority of the Shares in the Company, the Offeror may propose to the general meeting of the Company that an application is filed with Oslo Stock Exchange to de-list the shares of the Company.
The initial acceptance period in the Offer will commence following publication of the Offer Document and is expected to last for 21 business days, subject to any extensions. Barring unforeseen circumstances or any extensions of the acceptance period of the Offer, it is expected that the Offer will be completed in Q4 2021.
The Offer will not be made in any jurisdiction in which the making of the Offer would violate applicable laws or regulations or would require actions which the Offeror in its reasonable opinion, after having consulted with the Company, deems unduly burdensome.
Board recommendations and pre-commitments
Octopus Bidco and Ocean Yield have entered into a transaction agreement (the “Transaction Agreement”) regarding the Offer, pursuant to which the Board has agreed to recommend the Offer. As part of this, the Board has received a fairness opinion from its financial advisor DNB Markets, a part of DNB Bank ASA, concluding that the Offer is fair from a financial point of view to the shareholders of Ocean Yield. The full recommendation will be included in the Offer Document.
As the recommendation is made pursuant to the Transaction Agreement, the recommendation from the Board is not a formal statement made pursuant to sections 6-16 and 6-19 of the Norwegian Securities Trading Act. The Company has in this respect engaged Danske Bank as an independent third party and who is expected to provide the formal statement about the Offer to be issued in accordance with section 6-16 (1) cf. section 6-19 (1) of the Norwegian Securities Trading Act.
As part of the Transaction Agreement, and subject to customary conditions and based on fiduciary duties, the Board has entered into undertakings to only amend or withdraw its recommendation of the Offer if a competing offer is made, and such competing Offer fulfils certain agreed terms, including in the case of a cash offer that the offer is at least 5 per cent higher than the Offer Price, and the Offeror has not matched such superior offer within up to three business days after the Offeror has received notice thereof. As part of this, and subject to customary exceptions, the Board has agreed not to solicit competing offers from third parties.
Aker, the largest shareholder of the Company through its subsidiary Aker Capital AS, which owns 108,066,832 Shares, representing 61.65 per cent of the outstanding Shares in the Company, has irrevocably undertaken to accept the Offer on the first day of the offer period. In addition, the Offeror has received pre-commitments from all members of the Company’s Board and executive management who hold shares in the Company, as well as certain other related parties, together holding approx. 2.02 per cent of the Company’s shares, in which they have irrevocably undertaken to accept the Offer on the last day of the acceptance period for the Offer, however so that the undertakings may be revoked if the Board has amended or withdrawn its recommendation of the Offer.
FPSO Price Adjustment
The Company and Aker Energy AS (“Aker Energy”) has for some time been in dialogue regarding the sale of the FPSO to Aker Energy for the use in development and commercialization of the Deepwater Tano Cape Three Points block offshore Ghana.
In connection with the Offer, Aker Contracting FP ASA, an indirect subsidiary of the Company, and Aker Energy has entered into an agreement whereby Aker Energy (or its nominated affiliate) is granted an option to acquire the FPSO for USD 35 million, exercisable within the earlier of (i) 16 business days prior to settlement of the Offer and (ii) 15 December 2021 (the “Purchase Option”).
Aker Energy has previously paid Ocean Yield USD 17.9 million as compensation for certain prior options related to the FPSO as well as certain other services related thereto. The total investment by Aker Energy in securing the FPSO if the Purchase Option is exercised, will thus amount to USD 52.9 million. If an unrelated third party provides an all cash offer acceptable to Aker Contracting FP ASA, with no material conditions precedent, to purchase the FPSO during the option period at a price, whether higher or lower than USD 35 million, Aker Energy shall be entitled to declare the Purchase Option at such time for such alternative price, subject to a minimum USD 19 million, the assumed scrap value, in net proceeds after costs).
If Aker Energy exercises its Purchase Option to acquire the FPSO, or an agreement is entered into by a third party for the purchase of the FPSO no later than 16 business days prior to the settlement of the Offer, at a price higher than USD 19 million in net proceeds after costs, the Offer Consideration shall be increased by the NOK equivalent (based on a USD/NOK 8.15 exchange rate) per outstanding share in the Company of the difference between (A) the price for the FPSO (adjusted for any sales costs of Aker Contracting FP ASA if sold to another party than Aker Energy) and (B) USD 19 million.
If Aker Energy declares the Purchase Option at USD 35 million, the Offer Price will be adjusted to NOK 41.74, subject to any adjustments for dividend or other distributions made by the Company.
The Company has in connection with the transaction received a fairness opinion from Fearnley Securities AS supporting the option price of the FPSO of USD 35 million. The current book value of the unit is USD 51.3 million. The FPSO has been idle since its last contract in India expired in September 2018.
Sale of JV ownership stake by Aker Capital AS
The Company and Aker Capital AS owns 50 per cent each of OY Holding LR2 Limited which owns four LR2 product tankers with long-term charter to the Navig8 Group. At closing of the Offer, Aker Capital AS has agreed to sell its 50 per cent ownership stake to the Offeror for an aggregate purchase price of USD 5.1 million, (as adjusted pursuant to the share purchase agreement relating to such acquisition).
Rationale for the Offer
KKR recognises that Ocean Yield has a diversified, young and energy-efficient fleet with a clear strategic direction and best-in-class management team. Ocean Yield’s ship leasing model of entering into long-term charter contracts brings resiliency through economic cycles.
Given the long-term capital requirements of the shipping sector, including in the context of the structural trend towards decarbonization, KKR believes that a private setting will provide Ocean Yield with improved access to capital, thereby benefiting all stakeholders, including Ocean Yield’s employees, existing and future clients, creditors, and the shipping industry more broadly.
KKR brings significant experience in leasing business models and transportation, in addition to providing long-term capital through its Infrastructure strategies and taking a collaborative approach to value creation.
DNB Markets, a part of DNB Bank ASA, is acting as financial advisor to the Company. Advokatfirmaet Schjødt AS is acting as legal advisor to the Company. Advokatfirmaet BAHR AS is acting as legal advisor to Aker and Aker Capital AS.
Arctic Securities AS is acting as financial advisor to the Offeror. Wikborg Rein Advokatfirma AS and Simpson Thacher & Bartlett LLP are acting as legal advisors to the Offeror.
Source: Ocean Yield ASA