Baird describes successful maritime private equity deals in offshore vessel markets

Now, two mid-size Middle Eastern-focused players have been sold: Atlantic Navigation and its fleet of 20 vessels to a hitherto unknown entity called MAG Offshore Investments for US$183 million, and 75 per cent of Astro Offshore and its fleet of 26 ships and barges was sold to India’s Adani Ports for US$185 million.

Before we dig into the details of those deals, let’s take a quick recap of the deal-making landscape in offshore in recent years.

The deal landscape – to Hell and back

Before Vladimir Putin brutally attacked Ukraine and the global energy landscape radically changed, there were mainly liquidations and restructurings in offshore.

Over one thousand vessels were laid up from 2015 to 2020, hundreds were scrapped, most notably by Tidewater, and many storied and not-so storied names simply disappeared into liquidation – among them, Swiber, Ezion, Emas Offshore, Pacific Richfield, R.K. Offshore, Toisa, and Forland.

Norwegian players Deep Sea Supply and Farstad were forced into a three-way merger with Solstad by their creditors. Oman’s Team Energy and Marine was absorbed into Dubai’s DP World, but there really wasn’t much to celebrate as companies across the world grimly hung on and tried to survive.

Then, as liquidity and optimism finally returned to the offshore support vessel (OSV) market after seven bleak years, the deals started to return. First came the epic bargain of Swire Pacific Offshore’s fleet of fifty anchor handlers and platform supply vessels (PSVs) being sold to Tidewater for less than US$200 million in March 2022 (LOL), then Tidewater’s purchase of 37 PSVs from Solstad at the behest of its Norwegian creditor banks for US$594 million in July 2023.

These deals reinforced Tidewater’s position as the world’s largest OSV operator with a fleet of over 200 vessels, the biggest global footprint of operations, and the player with the richest managers.

UAE consolidation

In the Middle East, private equity fund SHUAA Capital of Abu Dhabi moved to acquire Stanford Marine for US$308 million in 2021, and then in March 2022, just after Tidewater bought the Swire fleet, SHUAA added Allianz Marine and Logistics and its very diverse fleet of over 100 craft working mainly in the UAE to its portfolio.

Not to be outdone, state owned ADNOC Logistics and Services, the marine division of Abu Dhabi’s state oil company, followed suit and bought Zakher Marine International in July 2022. Zakher owned and operated 24 jackup barges and liftboats, and 38 OSVs working in the Arabian Gulf.

No prices were announced for the Allianz or Zakher deals, sadly.

Vroon sells, Britoil buys, ENAV sells, AD Ports buys

Singapore containership entrepreneur Tim Hartnoll of X-Press Feeders fame and his Spanish partners bought Singapore’s anchor handling tug specialist Britoil from its creditors in Singapore, then Britoil snapped up three quarters of Vroon’s offshore fleet of 39 vessels in late 2023 to create a top ten player in fleet size.

Oaktree-backed Golden Energy Offshore took four of the prized PX121 design PSVs from one of Vroon’s banks for just over US$80 million in a side deal, whilst flipping a fifth subsea vessel for a quick profit. Other buyers snapped up Vroon’s small subsea and air dive vessels, and its two walk-to-work vessels.

Then, last November, Abu Dhabi’s AD Ports bought the 10 vessels of the eastern fleet of ENAV Radiance for US$200 million, whilst the five remaining ENAV vessels working in Mexico and Guyana were sold one by one over the last few months.

The company’s private equity owners did very nicely. As we see from the list of deals done and deals to come, private equity exits and entrances are one theme, credit and bank exits – as with Britoil and Vroon – another.

Scandinavia does it bigger

This year saw the biggest deal yet, the merger of Maersk Supply Service with DOF of Norway at a price of US$1.12 billion to create the world’s largest subsea and anchor handling company – the first billion dollar deal of the new cycle.

This followed closely on the heels of the decision by private equity fund Cyan to buy Australia’s MMA Offshore and its 20 vessels and its fleet of remotely operated vehicles (ROV) for AU$1.1 billion (US$702 million on the date of closing), and Cyan’s earlier acquisition of 75 per cent of North Sea fishery protection vessel and standby boat operator Sentinel Marine in January. Sentinel owns 13 Chinese-built emergency response and rescue vessels (ERRVs) in the UK.

Unfinished business – in Marseille

But there are several key deals that are still in progress, and that may or may not happen – the painfully slow restructuring of Bourbon is ongoing. This has seen a quartet of international investors replace some of the long-suffering French banks as debt holders and shareholders in the troubled French company with its fleet of over 100 OSVs, scores more crewboats and SURFers, and a dozen subsea ships.

Sources tell us that the Bourbon restructuring is complicated and multi-faceted, with many different stakeholders to manage, and some companies holding different claims on various assets in the Bourbon Group.

Unfinished business – in Louisiana

There are also the efforts by Hornbeck’s shareholders – distressed situations specialists and the American company’s former lenders – to try to re-float the company on the New York Stock Exchange. The company filed a 1,556-page registration statement with the Securities and Exchange Commission late last year ahead of a planned listing, as we reported, but since then the initial public offering seems to have stalled.

Recently, Twitter was abuzz with rumours that maybe Tidewater, a company bereft of a significant US Gulf of Mexico presence, might buy Hornbeck. Who knows?

Tidewater previously bought Hornbeck in 1996, but wily founder Larry Hornbeck retained the rights to the company name after the sale of its fleet, and his son Todd quickly established a successor company under the family name. “Like his father, Todd’s entrepreneurial spirit called him to leave Tidewater after the merger…” as per the company history.

Todd Hornbeck was able to take this second Hornbeck Offshore Services public in 2004, but burdened with debt, it was delisted in late 2019 and the creditors took control.

Unfinished business – in Germany

Private equity player Hayfin has been looking to sell German-headquartered United Offshore Services and its fleet of twelve 200-tonne bollard pull anchor handlers for more than 18 months now. Hayfin bought the ships and the management company from financially troubled German owner Dr Nils Hartmann in 2018. During Covid, the market downturn forced Hayfin to make a large capital injection to keep the business afloat.

We understand that the company is finally bringing its last long laid-up vessel GH Liberty back into service and the ship has been taken to Martinque for a class docking and reactivation.

UOS will be sold, but to whom, at what price, and when is not clear.

Unfinished business – in Oslo

Also trying to sell a fleet of anchor handlers is Norwegian holding company Akastor, which has three DOF-managed large anchor handlers remaining in its DDW Offshore subsidiary. In 2021, DDW Offshore sold the two 16,000bhp (12,000kW) anchor handling tug supply (AHTS) vessels Skandi Saigon and Skandi Pacific to Oceanpact in Brazil.

The three remaining DP2 sister vessels of STX AH08 design and around 200 tonnes bollard pull, Skandi Atlantic, Skandi Peregrino, and Skandi Emerald, were built in Vietnam between 2010 and 2012. They have also been widely circulated for sale by numerous brokers for the last 18 months.

A year ago, DDW Offshore completed a US$31 million refinancing with EnTrust Global’s Blue Ocean Funds as lenders, which included funds to reactivate Skandi Peregrino from lay-up, and the ship is now trading in the North Sea spot market, whilst her two sisters are working out of Australia and are due off contract later this year.

Unfinished business – in Singapore

Southeast Asian owner POSH is also seeking to sell off its remaining offshore fleet and has several Middle East-based vessels for sale, including at least one UT755 design PSV, along with various AHTS of up to 150 tonnes bollard pull in Southeast Asia.

Also, in Southeast Asia, the owners left holding the 2008-built, long laid-up anchor handlers of 10,880bhp (8,113kW) Ark Tori and North Silver in Brunei Bay are looking to drydock and reactivate the vessels and then sell them.

Unfinished business – in the Netherlands

Whilst Vroon sold its 39 OSVs in 2023, it retained its fleet of 34 ERRVs working in the North Sea along with various product tankers and livestock carriers. It is believed that these remaining assets will be sold in 2025.

With every other major ERRV operator including Esvagt, North Star Shipping and Sentinel, now owned by private equity, and with all three of these competitors now focusing on the wind and renewables markets, as North Sea drilling in the UK sector fades, Vroon’s safety standby fleet will likely attract interest.

Long-term safety standby contracts and the possibility of a springboard into windfarm support will surely mean Vroon’s shareholder banks find a buyer, either a part of a full fleet deal for the whole company, or via a sale of the ERRV division as a stand-alone business.

Unfinished business – in Athens

Finally, rumours reach us that the Southpoint Marine fleet of six AHTS of between 80 and 100 tonnes bollard pull and one small PSV with 400 square metres of clear deck is for sale by its Greek owners. This is a more mature fleet, with the ships mostly built in 2006 to 2009 and scattered globally between the Arabian Gulf, West Africa, and the Mediterranean.

So, if you want to enter offshore, there are many deals still out there, from the small to the large, with geographic variety, and a wide range of different ships.

Who’s game?

Markets find capacity when rates rise

High prices attract vessels back to the market, whether from PSVs planned for yacht conversions (ex-Havila Crusader) or as scallop boats in Norway (Arctic Pearl). Whilst Tidewater now claims to have punched through the US$40,000 day rate level for large PSVs internationally, the return of many formerly laid-up ships to service and the release of tonnage from China have acted as a brake on day rate growth in other categories.

This trend of reactivating ships means that there are now no longer any laid-up PSVs or AHTS in the North Sea, and very few in the previous lay-up hot spots of Curacao, Batam, Abidjan, and Ras al Khaimah.

Indeed, the CEO of Go Offshore has been highlighting in social media the reactivation of the company’s PSV Go Matilda in Singapore, a 2010-built ship of 3,800DWT formerly managed by Wintermar of Indonesia as Pearl Ark 1, and before that as Lewek Ariel, owned by ill-fated Emas Offshore.

A rising tide lifts all vessels?

Against this background, the sales of both Atlantic Navigation to MAG and Astro Offshore to Adani Ports are interesting for a number of reasons. The deals highlight several trends to look out for in the OSV industry.

Firstly, both buyers were not established names in the offshore business. This is not a Tidewater or DOF making an acquisition, nor a state-owned maritime superpower like ADNOC L&S or AD Ports. Nor do they feature a private equity acquirer like SHUAA or Cyan. Instead, both buyers are complete newcomers to the offshore industry. Indian-owned Adani Ports operates, as the name implies, ports and terminals.

Marshall Islands consortium buys Atlantic

Contrary to industry reports that MAG is an Emirati company, as per Atlantic Navigation’s Singapore Stock Exchange filings, the Atlantic fleet is actually being purchased by a Marshall Islands company owned by a trio of investors, one of whom is an existing UAE offshore player. Given the previous mistake we made in the earlier version of this column, we will stick to reproducing the wording in the regulatory filing and avoid speculation on who these players might be, although we now have an inkling.

“MAG Offshore is a joint venture company incorporated under the laws of the Marshall Islands in 2024,” Atlantic informed investors. “MAG Offshore is in the business of acquiring offshore maritime assets that support the  oil and gas industry. MAG Offshore was formed as a strategic partnership amongst an operator of offshore support vessels and marine logics services providers in the Middle East, an international shipping company and a maritime investor.”

We apologise sincerely and profusely to Moafaq Al Gaddah, the award-winning Emirati entrepreneur, multi-billion dollar business leader and philanthropist, whom we mistakenly identified as the buyer of the fleet, though his similarly named MAG group. The record stands corrected. However, the presence of this unnamed “international shipping company” and the “maritime investor” supports our thesis.

Like the acquisition of the Standard Supply fleet of six PSVs by Evangelos Marinakis’ Capital Offshore, which closed earlier this year, and Mr Hartnoll’s foray from feeder boxships into Britoil last year, these deals see newcomers to the offshore supply industry enter the market.

But these are newcomers with a very limited experience of maritime operations, unlike the extremely successful ocean-going shipowners Mr Marinakis and Mr Hartnoll. This suggests that the returns the industry is showing in the upcycle are attracting interest from players looking to diversify and enter what is perceived as a “hot sector” from even less adjacent businesses, like lubes and property.

Where is the quality?

Secondly, unlike Maersk Supply, Swire Pacific Offshore, Solstad’s PSVs, or even Stanford Marine or Zakher, the Atlantic Navigation and Astro Offshore fleets are not premium assets. At the core of both fleets, excluding Astro’s nine dumb flattop cargo barges, are 5,150bhp (3,840kW), 60-tonne bollard pull anchor handlers and utility vessels.

These are the most basic offshore vessels in existence, an asset class entirely built in China, often not DP2, and requiring limited technical capability. Yes, there were one or two nicer ships in each fleet, such as the multi-purpose, 101-passenger DP2-capable Astro Aquila and the 90-passenger workboat Astro Arcturus, and Atlantic’s 2016-built liftboat AOS Maintainer 1. But the core fleets are not complex or sophisticated.

Amber warning lights from Aramco?

With the slowdown in rig contracting in Saudi Arabia from Saudi Aramco, the next few months could see a reduction in activity in the Arabian Gulf. This might impact both Astro and Atlantic adversely as rigs are either stacked or removed from the region, freeing up OSVs to compete outside the Kingdom.

Shelf Drilling, ADES, and COSL have all removed their suspended rigs from the Gulf to reposition them to other markets on new contracts, whereas few vessels have yet left the region on account of the higher relative repositioning costs, and the fact that the staple smaller, lower-specification vessels used in the Gulf are less suited elsewhere.

Savvy sellers achieved great prices

Tidewater’s ongoing Arabian Gulf experience of break-even charters, low day rates relative to other regions, and nasty contractual terms suggests that the owners of Astro, Mark Humphries and his business partner Alvin Lim, and the largest shareholder in Atlantic, CEO and Founder Bill Wong, have timed and priced their exits nicely.

Recall that just over two years ago, Swire sold 50 ships that are currently worth over US$1 billion for less than US$200 million to Tidewater. Now both Atlantic and Astro have each sold around 20 vessels and barges of vastly lower quality for similar figures.

We wish Adani and MAG every success in their forays into offshore. The rising market means that all the offshore deals done since 2021 have been very much in the money as both asset prices and day rates have continued to rise. Newcomers to offshore like Mr Hartnoll and Mr Marinakis have shown that their innate shipping deal-making judgements, based on years of experience in the ocean shipping markets, have been proven right so far.

The offshore fleet orderbook remains negligible, despite a few more “drip drips” of newbuilding contracts being placed (which we will address soon).

Do 60-tonners really “pop”?

However, the latest deals come at a time when the Arabian Gulf market faces more challenges than any other market, and the quality of the assets changing hands concerns me at the prices paid.

The ability of small and simple ships like the staple 5150 BHP anchor handlers to “pop” seems limited. I reckon the sellers seem to have achieved excellent prices, and I look forward to seeing what they do next.