Company Briefs - 27 Jun 2007

Affinity Equity, TPG Capital team up to buy Utac

AFFINITY Equity Partners and TPG Capital have teamed up to acquire United Test and Assembly Center Ltd (Utac) in a deal that values the company at up to $2.2 billion.

The proposed acquisition, announced late last night, is in cash at $1.20 per Utac share, and will be effected by a scheme of arrangement. Utac has entered into an agreement to implement the scheme with Global A&T Electronics, a special-purpose company formed by Affinity and TPG.

Under the scheme, all issued ordinary shares in Utac held by Utac shareholders will be acquired by Global A&T Electronics. Upon completion of the scheme, Utac will be delisted.

The $1.20 per share price reflects a premium of 20 per cent to Utac's six-month volume weighted average price and a 78.3 per cent premium to Utac's net asset value per share based on Utac's unaudited accounts for the three months ended March 31, 2007.

Utac non-executive chairman Charles Chen said: 'The proposed acquisition provides an opportunity for Utac shareholders to realise their investment in Utac shares for cash at a premium to historical closing share prices of the company.'

Affinity's managing partner David Lai said: 'We have a high regard for the track record of Utac and its current management team. A key objective for us is to retain the team after the close of offer.'

The share scheme must be approved by a majority in number representing at least 75 per cent in value of the shares held by Utac shareholders present and voting at a court-convened meeting. Affinity and TPG have received irrevocable undertakings from certain Utac shareholders representing about 17.2 per cent of Utac's current issued share capital to, among others, vote, or procure the voting of all their shares in favour of the scheme.

Utac independent directors have appointed ANZ Singapore as the independent financial adviser.
Hong Leong in budget hotel chain venture

A CHAIN of 30 budget hotels is to be set up across South-east Asia over the next three years in a US$50 million joint venture between Hong Leong Group and Dubai investment company Istithmar.

Hong Leong, through its subsidiary City Developments' City e-Solutions (CES), will take a 40 per cent stake in the joint company, Tune Hospitality Investments.

Another 40 per cent will be owned by Istithmar, the investment arm of Dubai World, which is fully owned by the government of Dubai.

The remaining 20 per cent stake will be held by Tune Hotels.Com, which will develop and operate the hotels. Tune Hotels.Com is owned by the founders of the AirAsia budget airline.

The partners plan to exit their investment through the private or public markets in four to six years' time, they said. One option will be selling the hotels to CityDev's listed real estate investment trust, CDL Hospitality Trusts.

With the hotels, which will all have the 'Tune' brand, the partners hope to address the lack of affordable and quality budget accommodation in the region.

The first Tune Hotel opened in Kuala Lumpur in April this year and has been enjoying 91 per cent occupancy since. Additional properties are due to be opened over the next few years in Penang, Johor Baru, Kuching and Kota Kinabalu, although these will not be owned by the new company.

The new company will instead look for new locations in Malaysia, Indonesia, Thailand, the Philippines and Singapore to set up its 30 hotels. The venture will focus on destinations served by the region's rapidly growing low-cost airlines.

Tune operates a 'no-frills' hotel concept, using many tactics pioneered by budget airlines - including a Internet-based reservations system, demand-based pricing and outsourcing of operations such as F&B. Most of the hotels will have 150 to 250 rooms.

'With low-cost carriers making air travel affordable and accessible to everyone, there has been a correspondingly strong demand for affordable and quality hotel accommodation to meet the needs of such economy travellers who are comfortable with prepaid, online bookings,' said Vincent Yeo, chief executive of CES.

The investment will mark CityDev's first foray into budget hotels. The developer has more than a dozen high-end hotels in the region, including the Grand Copthorne Waterfront Hotel, M Hotel and Orchard Hotel in Singapore.

CityDev's shares closed 20 cents down at $17.20 yesterday.

KS Energy wins 2 land rig deals worth $47m

THE Norwegian connection is starting to pay off for Indonesian tycoon Kris Wiluan's KS Energy (KSE) group.

The company announced yesterday that it had clinched two new land rig deals worth a total of $47 million - including the first by its recently acquired Atlantic Oilfield Services (AOS) of Norway, for which KSE paid $122 million in May.

This $34.3 million drilling contract for BP Pakistan, covering supply and management of a 1500HP land rig, will see KSE offering for the first time a comprehensive package, including providing the drilling crew and carrying out the drilling operations.

'This takes KSE to a new, higher platform,' Mr Wiluan said during a media teleconference yesterday.

'It marks the group's integrated service to a major oil company and entrance into new territory.'

KSE is negotiating more such 'one-stop package' rig deals, he said, but did not disclose details. This has been made possible by its recent acquisition of AOS, which has given it 'not only good assets but also good management expertise' with eight senior AOS personnel with considerable oilfield experience.

A land rig which it recently acquired for BP will be refurbished, re-certified and upgraded by AOS's facility in Dubai before being shipped to the Badin field, 175 km north-east of Karachi, for commencement of drilling in Q1, 2008.

The contract is for one year with an option to extend into a second year.

Additionally, KSE has also secured a $12.8 million dry lease charter contract for an oilfield operator in Kurdistan for two years, with a one-year renewal option.

This involves lease of a land rig only and no drilling crew will be provided.

KSE's recent acquisition of Dubai-headquartered, Norwegian oilfield services company AOS is its second such Norwegian-Middle East venture.

'We are negotiating the lease of the jack-up with several oil companies in the Middle East, and we expect to conclude a deal by year-end,' Mr Wiluan said, adding that he was confident of doing so because of the shortage of exploration and production equipment in the Gulf.

SembCorp Marine clinches US$190m contract for jack-up rig

JUST a day after Keppel Corporation announced it had won rig contracts worth US$534 million, arch rival SembCorp Marine, the world's second-largest builder of offshore rigs, reported a US$190 million contract for a deep-drilling offshore jack-up rig for Offshore Group Corp.

The high-performance rig is the third in a series of three identical BMC Pacific 375 design jack-up rigs that the Offshore Group has ordered from SembMarine subsidiary, PPL Shipyard, following the first unit in October 2006 and the second in January this year.

Construction of the jack-up rig is expected to start in the third quarter of 2007 with delivery scheduled in September 2009. To be built based on PPL's proprietary BMC Pacific 375 Deep Drilling design, the jack-up rig will be equipped with a drilling package with capabilities to drill high-pressure and high-temperature wells at 30,000 feet while operating in 375 feet of water. It is also designed with accommodation for 120 people.

PPL's managing director Ong Tian Khiam said: 'This third jack-up rig order is a reflection of the optimism that owner has in the jack-up rig market and in particular our rig design and our ability to deliver on schedule and within budget.'

SembMarine's net order book to date stands at S$9.1 billion with completion and deliveries until 2010. This includes S$4.5 billion new orders secured so far this year. In comparison, Keppel's current order book stands at over S$11 billion, of which S$3.3 billion were secured this year alone.

PPL has built a total of 29 jack-up rigs, six semi-submersibles, and four swamp barges. Its flagship jack-up design, the Baker Marine Pacific Class 375 design, has secured orders for 19 units so far since its launch in 2004. Four of these deep-drilling jack-up rigs have since been delivered.