KUALA LUMPUR (Nov 14): Bumi Armada Bhd (KL:ARMADA) is exploring a merger with MISC Bhd’s (KL:MISC) offshore business that could create a global energy services powerhouse with combined assets worth over RM20 billion.

Under the memorandum of understanding signed, the parties will have nine months to conduct due diligence and sign a definitive agreement, MISC and Bumi Armada said in separate but similarly worded exchange filings. The merged entity is expected to remain listed on Bursa Malaysia, they said.

The prospective merger is expected to be an all-share transaction.

“The proposed merger will establish a Malaysian-based sector-focused entity which leverages the combined talent pool, project development and engineering capability, and know-how” of both MISC’s offshore business and Bumi Armada, the filings said.

For MISC, the merger will only involve its offshore business that owns, leases, operates and maintains offshore, floating, production, storage and offloading (FPSO) terminals. MISC mainly ships liquefied natural gas as well as operates a fleet of petroleum tankers.

MISC was previously considering a stake in Bumi Armada, The Edge reported in July.

Assets to compete globally

If the merger goes through, the combined businesses will have “the scale, resources and financial capacity to compete in the growing and capital intensive offshore floating production segment”, the companies said.

Bumi Armada has assets valued at RM11.46 billion at the end of June while the total assets of MISC’s offshore business is worth RM8.65 billion at the end of 2023, according to latest available information.

Bumi Armada wholly owns three out of the seven FPSO vessels. The company also has a wholly owned liquefied natural gas floating storage unit and two pipe-laying and umbilical laying vessels.

MISC, majority controlled by national oil and gas company Petronas, owns seven FPSO vessels and five floating storage and offloading units.

Billionaire T Ananda Krishnan, who also controls Maxis Bhd (KL:MAXIS) and Astro Malaysia Holdings Bhd (KL:ASTRO), is the largest shareholder of Bumi Armada with nearly 35% stake.

“The proposed merger is at an early stage of evaluation” and there is no certainty that the ongoing discussions between Bumi Armada and MISC will lead to an agreement or a merger, the companies added.

At Thursday’s closing, shares in Bumi Armada settled up 0.5 sen or 1% to 50 sen, giving it a market capitalisation of RM2.96 billion. MISC’s shares closed one sen or 0.1% lower at RM7.95, valuing the company at RM35.49 billion.