Posted on November 7, 2022
In a Singapore stock exchange announcement, Singapore Technologies Engineering Ltd (ST Engineering) has announced that its subsidiaries have entered into an agreement to divest the entire issued and outstanding equity interests in its U.S. Marine subsidiaries, VT Halter Marine, Inc (Halter Marine) and ST Engineering Halter Marine and Offshore, Inc. (STEHMO) to Bollinger Shipyards Lockport LLC for a cash consideration of US$15 million (about SGD 21 million) on a cash-free, debt-free basis, subject to net working capital adjustments, if any, post-closing.
In addition, ST Engineering may receive earn-out payments post-closing of up to an aggregate amount of US$10.25 million, subject to the award of certain future shipbuilding contracts to Halter Marine and such contracts meeting the requisite operating profit margins.
According to Bollinger, the acquisition includes 378 acres comprising 2 shipyards in Pascagoula and two dormant yards north of Pascagoula. The newly acquired yards will be renamed Bollinger Mississippi Shipbuilding and Bollinger Mississippi Repair. The Pascagoula facilities are strategically located with direct, deep-water access to the Gulf of Mexico and houses corporate office space, engineering, fabrication, warehousing and a foreign trade zone. The shipyard consists of 225,000 square feet of covered production area in the main fabrication assembly buildings. The facility is capable of producing Panamax-sized vessels up to 50,000 DWT and features an expanded 225.6 meter (740ft) tilt-beam launch system.
Bollinger says all ongoing programs are to be conveyed with the transaction, including the Polar Security Cutter (PSC) program for the U.S. Coast Guard and the Auxiliary Personnel Lighter-Small (APL(S)) program for the U.S. Navy.
In its announcement, ST Engineering says it has been undertaking regular portfolio review and rationalization to ensure that it focuses on businesses that are strategic and which yield higher returns.
The group says that it conducted a thorough review of the two U.S. marine businesses and that they have incurred a combined net loss before tax of US$256 million in the last five years (2017-2021), with an annual net loss before tax that ranged from about US$40 million to US$60 million.
This review resulted in the engagement of financial advisor Macquarie Capital (USA) Inc. to conduct an auction process involving both strategic investors and private equity funds.
The process, says ST Engineering, “culminated in the selection of Bollinger as the most suitable purchaser, taking into consideration their good reputation and strong track record in undertaking U.S. Navy and U.S. Coast Guard programs. Additionally, as a designer and builder of high-performance vessels, the group believes that Bollinger has the capability and resources to add value to both businesses’ programs, including the Polar Security Cutter. Bollinger, the largest privately-owned and operated shipbuilder in the U.S., is principally engaged in the design, engineering and construction of complex, high endurance U.S. Coast Guard and U.S. Navy vessels, research vessels and offshore oil field support vessels and tugboats, amongst others.”
CHALLENGES AND LOSSES
“We have experienced challenges and losses in the past years operating the two U.S. shipbuilding and ship/rig repair businesses. After a thorough review of strategic alternatives, we made this difficult decision to exit the U.S. Marine business,” said Vincent Chong, Group President & CEO of ST Engineering. “We believe that this proposed transaction represents a favorable outcome for ST Engineering shareholders, Halter Marine and STEHMO as well as their stakeholders.”
“We thank our U.S. marine employees for their contributions over the years, including accomplishing many shipbuilding successes and delivering niche vessels with high engineering contents to their customers,” said Ng Sing Chan, President of ST Engineering’s Marine business area.
“The addition of Halter Marine and STEHMO is strategic as it further strengthens our position in the industry and U.S. defence industrial base by allowing Bollinger to expand our footprint, capabilities and suite of innovative solutions that we can provide to our government and commercial customers,” said Ben Bordelon, CEO and President of Bollinger Shipyards. “I look forward to bringing in the skilled employees of shipbuilders from Mississippi into the Bollinger family. By combining our skilled workforces, we’ll ensure coastal Mississippi remains synonymous with defense shipbuilding and a major part of our industrial base.”
“From Day One, the Bollinger team will leverage our proven and best-in-class management team, operational excellence and existing capability to ongoing commercial and government programs, especially the Polar Security Cutter program,” said Bordelon.
ST Engineering says the order book of the two U.S. Marine businesses was S$1.9 billion (about US$1.35 billion) at the end of September 2022.