Singapore Technologies Engineering Ltd (ST Engineering) has announced 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, L.L.C. (Bollinger) for a cash consideration of US$15m (about S$21m) on a cash-free, debt-free basis, subject to net working capital adjustments, if any, post-closing. In addition, ST Engineering may receive earnout payments post-closing of up to an aggregate amount of US$10.25m, subject to the award of certain future shipbuilding contracts to Halter Marine and such contracts meeting the requisite operating profit margins.
ST Engineering has been undertaking regular portfolio review and rationalisation to ensure that it focuses on businesses that are strategic and which yield higher returns.
The Group conducted a thorough review of these two U.S. marine businesses. These two business units have incurred a combined net loss before tax of US$256m (S$349m) in the last five years (2017-2021), with an annual net loss before tax that ranged from about US$40m (about S$56m) to US$60m (about S$85m).
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 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 programmes.
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’ programmes, 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.
ST Engineering maintains its 2026 targets and remains focused on the strategic growth areas outlined in its five-year (2022-2026) plan as communicated at its 2021 Investor Day.
Notwithstanding this proposed divestment, the U.S. remains a key market for ST Engineering and the Group will continue to invest in its businesses in the U.S. This includes, among others, focusing on its existing defence business and expanding its commercial businesses such as Commercial Aerospace and Smart Mobility.
Likewise, the Group’s Marine business in Singapore continues to be core and strategic.
The order book of these two U.S. Marine businesses was S$1.9b at the end of September 2022. The value of the order book of these two businesses will be removed from the Group’s order book at closing. The Group’s order book remains strong at S$25.0b at the end of September 2022.
The proposed divestment is expected to result in a loss on disposal, which is non-cash in nature, of approximately S$13.3m. It is expected to be completed before the end of December 2022, subject to certain closing conditions.