Clough Limited (ASX:CLO) has agreed to sell its offshore Marine Construction Division to SapuraCrest Petroleum Berhad, a company listed on the Malaysian stock exchange, for gross proceeds of approximately A$127 million (US $129 million) in cash. The companies have entered into a conditional Master Sale and Purchase Agreement with certain conditions precedent.
Clough's offshore Marine Construction Division includes the derrick lay barge, Java Constructor, and associated marine construction equipment. Also included will be Clough’s interest in the Clough Helix Joint Venture, which operates the chartered Normand Clough vessel, and its investments in specialist engineering businesses, OFI and Peritus. Relevant contracts including the Chevron Gorgon Domestic Gas pipeline project are proposed to be novated.
Post transaction the division will continue to operate from Perth with a continuing focus on both the Australian and regional markets. Clough will continue to provide a number of back office services to the business for a period of two years.
The sale will see Clough exit the asset intensive offshore marine construction market.
Clough CEO, John Smith said, “Whilst Clough has enjoyed a long history of successfully executing marine construction projects, it is a sector where significant capital investment is required to compete with the larger regional and global players. Our results have been lumpy in this division and consistency requires scale, flexibility of assets and broad geographic coverage. We believe SapuraCrest will bring these characteristics and we wish them and the skilled workforce who will transfer every success for the future. Opportunities abound in the Australian gas and mineral sectors. Our strategy remains that of Engineering led EPC and this transaction leaves Clough with significant net cash and with capacity for further investment.”
The sale is subject to satisfaction of a range of conditions precedent, including SapuraCrest obtaining Malaysian Central Bank and shareholders’ approval, the consent of relevant clients and partners, the transfer of certain marine construction division staff, and Clough receiving approval from its debt funders. It is anticipated that satisfaction of these conditions precedent will take up to three months. As a result, completion of the sale is currently expected to occur in Q2 of the 2011/12 financial year.
The Marine Construction Division reported an underlying loss of AUD7.6m in the 6 months to 31 December 2010 after reporting underlying earnings of AUD24.1m in the year ended 30 June 2010. Based on current estimates, the one off profit on the sale is expected to be approximately AUD8m. The net increase in cash held by Clough will be approximately AUD50m after full repayment of Clough’s debt facility with RBS and allowing for cash held by the division.
Established in 1919, Clough delivers an integrated Engineering, Procurement and Construction service primarily to oil and gas projects in Australia, South East Asia and the USA. The Group's services range from concept development through design, construction, installation, commissioning, operations and maintenance.
Clough to sell offshore marine construction division to SapuraCrest for $129MM