Extended notice regarding agreement to sell APL to National Oilwell Varco for USD 500 million
NOT FOR PUBLIC DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, SOUTH AFRICA, CANADA, AUSTRALIA OR JAPAN
13 September 2010 - This stock exchange notice is being published pursuant to Section 3.4 of the Oslo Stock Exchange's Continuing Obligations.
The transaction and parties
On 13 September 2010, BW Offshore Cyprus Ltd, a wholly owned subsidiary of BW Offshore Limited ("BW Offshore" or the "Company") entered into an agreement to sell all of its shares in its subsidiary APL (Advanced Production & Loading) Plc ("APL") to National Oilwell Varco Norway AS, a wholly owned subsidiary of National Oilwell Varco, Inc. ("National Oilwell Varco"), (the "APL Transaction"). As consideration for the purchase of APL, National Oilwell Varco shall pay USD 500 million in cash to BW Offshore, adjusted for cash, debt and deviations from an agreed level of working capital of the APL Group (as defined below) at the time of completion of the transaction.
In connection with the transaction, BW Offshore and APL will enter into a supply agreement, a technology agreement and a non-compete agreement (the "ancillary agreements"). Pursuant to the ancillary agreements, BW Offshore will purchase from APL on commercial terms certain systems on an exclusive basis for a period of seven years, and the parties will cooperate with respect to technology development.
BW Offshore has agreed that neither BW Offshore nor any of its subsidiaries shall carry out activities in competition with APL's current business for a period of five years.
The APL Transaction includes APL and the following subsidiaries of APL: BW Offshore Norway AS, BW Offshore Singapore Pte Ltd, Advanced Production & Loading Inc, Advanced Production & Loading Pte Ltd, APL do Brasil Ltda, APL UK Ltd, APL Technology AS and BW Offshore France SAS (together with APL, the "APL Group"). Any FPSO related assets, liabilities and personnel of companies in the APL Group, and certain other assets, will be transferred to other entities in the BW Offshore group prior to completion of the APL Transaction.
Completion of the APL Transaction is subject to certain customary conditions, among other things; receipt of regulatory and governmental approvals and third party consents, no material adverse effect having occurred, correctness of warranties, the parties entering into of the ancillary agreements and the parties otherwise complying with the agreement.
Further, the completion of the APL Transaction is subject to board approval of National Oilwell Varco and BW Offshore. The transaction agreement does not include a financing condition.
Completion of the APL Transaction is expected to take place before end of the fourth quarter of 2010, subject to satisfaction or waivers of the conditions set forth therein. The transaction agreement may be terminated by either party if completion has not occurred by 31 December 2010 for any reason other than through the fault of the party seeking to terminate the agreement.
Description of APL
APL (Advanced Production & Loading) Plc is a public limited liability company incorporated under the Cyprus Company Law with company registration number HE189062. APL was acquired by BW Offshore in 2007 and is the parent company of BW Offshore's APL division.
The APL division has gained a reputation as a leading provider of systems for offshore production and transfer of oil and gas. APL has since its start experienced a substantial growth worldwide, and to date the APL division has delivered more than 50 production and terminal systems and close to 120 shipboard and vessel systems.
The APL division is involved in two product lines; sale of mooring, turret and fluid transfer systems to storage and production vessels (Production Systems) and offshore terminals and cargo transfer systems for oil and gas, including specialized ships-equipment (Terminal Systems). The systems and the equipment delivered by the APL division are used in offshore production, storage and transport of oil and gas, all of which are based on the usage of ships. The products are sold to the international market and customers are usually oil field operators, companies that are responsible for an integrated oil field development, or shipping companies.
The current members of APL's board of directors are Carl K. Arnet (Chairman), Knut Borgen and Panos Labropoulos. The current members of APL's management team are Erik Svendsen (Executive VP), Høye Gerhard Høyesen (Senior VP), Arild I. Stiansen Volden (Manager HSE & QA APL), Nordine Benbernou (Senior VP Business Development), Arild Bech (Senior VP Engineering and Technology), Bjørn Morten Mikalsen (Manager, After Sales and Service), Jens P. Kaalstad (President of Advanced Production and Loading, Inc.) and Bjørn Reang (Senior VP Corporate Controlling).
As of 30 June 2010, the APL Group had approximately 230 employees.
The following table sets out selected segment financial information for the APL division as of, and for the periods ended, 31 December 2009 and 2008, and as of, and for the six months period ended, 30 June 2010 and 2009.
| As of and for the six months ended 30 June | As of and for the year ended 31 December | |||
| USD million | 2010 | 2009 | 2009 | 2008 |
| Operating revenue.................................. | 65.6 | 152.9 | 251.9 | 395.9 |
| Operating expenses................................ | (60.5) | (131.6) | (220.4) | (354.6) |
| Share of profit of associates.................... | 0.0 | (39.5) | (39.5) | (0.4) |
| Impairment charge of associates........... | 0.0 | 0.0 | 0.0 | (81.3) |
| Operating profit / (loss) before depreciation | 5.1 | (18.2) | (8.0) | (40.4) |
| Depreciation, amortization and write-down | (6.9) | (9.9) | (20.3) | (189.1) |
| Operating profit / (loss)...................... | (1.8) | (28.1) | (28.3) | (229.5) |
| Segment assets...................................... | 483.6 | 527.7 | 492.5 | 605.7 |
Importance of the APL Transaction to BW Offshore
BW Offshore's strategic focus is on maximizing shareholder value by obtaining class leading return on invested capital. As part of BW Offshore's business development strategy, the Company is continuously evaluating possibilities with this aim. This may from time to time involve the acquisition or disposal of certain assets or companies.
In 2007, BW Offshore acquired APL, which at that point was regarded as a strategically important step in the development of the Company. The rationale behind the acquisition was to strengthen the Company's market position, enhance engineering and project execution capabilities and create a strong technology edge to offer an integrated service offering to oil companies. The collaboration between the BW Offshore and APL organizations has been successful in attaining this goal. In addition, BW Offshore wanted to ensure access to mooring technology at this crucial point in the development of the Company's business. Mooring technology is an important element in FPSO developments and APL was the only available mooring contractor of significance.
BW Offshore's FPSO business has grown considerably in terms of fleet size, presence, experience and competence since the acquisition of APL in 2007. BW Offshore has in that period completed three large and complex FPSO conversions and is today operating a fleet of six FPSOs and one FSO. BW Offshore has in addition contracted a further three conversion projects that will be in operation in 2-3 years, in addition to one significant engineering, procurement and construction (EPC) job. This development of the Company combined with the proposed transaction to acquire Prosafe Production Public Limited makes the ownership in APL less strategically important for BW Offshore today.
National Oilwell Varco is a worldwide leader in providing major mechanical components for land and offshore drilling rigs, complete land drilling and well servicing rigs, tubular inspection and internal tubular coatings, drill string equipment, extensive lifting and handling equipment, and a broad offering of downhole drilling motors, bits and tools. National Oilwell Varco also provides supply chain services through its network of distribution service centers located near major drilling and production activity worldwide. National Oilwell Varco has a large footprint in the Norwegian oil service industry and more than 700 worldwide manufacturing, sales and service centers. National Oilwell Varco has a stated strategy to enter the FPSO business as a provider of systems and mechanical components. The supply agreement with APL, as described above, will continue to secure BW Offshore access to APL's products and services at market terms for a period of five years. BW Offshore believes that National Oilwell Varco, through its substantial global manufacturing activity and competence, will be able to contribute significantly to APL's further development of cost effective, reliable and safe turret and mooring technology.
Following the sale of APL, BW Offshore will become a pure-play leading FPSO provider with a portfolio of long term contracts and worldwide operations in all important markets. This will create even better transparency for analyzing the Company from an equity market perspective.
The total consideration from the sale of APL of USD 500 million will significantly strengthen BW Offshore's balance sheet and improve strategic flexibility going forward, which will enable further profitable growth for BW Offshore in the present market.
Related party agreements
No agreements have been, or are expected to be, entered into in connection with the APL Transaction for the benefit of the executive management, key employees or members of the board of directors of BW Offshore or APL.
Information memorandum and supplemental offer document
Further details of the APL Transaction will be presented in an information memorandum that will also contain supplemental information to the offer document dated 27 July 2010 issued by BW Offshore regarding the voluntary exchange offer (the "Offer") for all of the issued and outstanding shares of Prosafe Production Public Limited (the "Supplemental Offer Document"). BW Offshore will publish the Supplemental Offer Document as soon as possible, following review by the Oslo Stock Exchange and the Norwegian Financial Supervisory Authority.
Investors having accepted the Offer prior to publishing of the Supplemental Offer Document shall have the right to withdraw their acceptance within two days following the date of the publishing of the Supplemental Offer Document. In order to exercise such right, investors must deliver their withdrawal to Carnegie ASA by mail, fax or by hand within the said deadline: Carnegie ASA, Stranden 1, Aker Brygge, P.O.Box 684 Sentrum, N-0106 Oslo, Norway (fax number +47 22 00 99 60). Investors that have accepted the Offer before the publishing of the Supplemental Offer Document, and who do not withdraw their acceptances, will be deemed to have accepted the adjusted offer.
Carnegie ASA is acting as financial advisor to BW Offshore in relation to the APL Transaction.
Advokatfirmaet Thommessen AS is acting as BW Offshore's legal advisor as to Norwegian law in connection with the APL Transaction.
For further information, please contact:
Carl K. Arnet, CEO, +65 9630 3290
Knut R. Sæthre, CFO, +47 9111 7876
About BW Offshore
BW Offshore is one of the world's leading FPSO contractors and a market leader within advanced offshore loading and production systems to the oil and gas industry. BW Offshore has more than 25 years' experience and has successfully delivered 14 FPSO projects and 50 turrets and offshore terminals. BW Offshore's technology division APL has delivered solutions for production vessels, storage vessels and tankers in a wide range of field developments. Adapting through competence, in-house technology, solid project execution and operational excellence, BW Offshore ensures that customer needs are met through versatile solutions for offshore oil and gas projects. BW Offshore has a global network with offices in Europe, Asia Pacific, West Africa and the Americas. BW Offshore has 1,100 employees and is listed on the Oslo Stock Exchange. For more information, please visit www.bwoffshore.com and www.apl.no.
This announcement is not an offer for sale of any securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the U.S. Securities Act. BW Offshore has not registered and does not intend to register any portion of any offering of shares in the United States or to conduct a public offering of any securities in the United States.