Acquisition talks reported between Malaysian FPSO players, but no 'material development'

Malaysian shipping giant MISC has moved to downplay market talk that it could be nearing a deal to take a significant stake in compatriot floating production, storage and offloading contractor Bumi Armada.

“MISC actively explores investment opportunities that have the potential to add value to its shareholders,” a MISC spokeswoman told Upstream.

“MISC will certainly communicate with relevant stakeholders if and when there is material development.”

Malaysian business publication The Edge Weekly had reported that MISC — a 51% subsidiary of the nation’s energy behemoth Petronas – was in talks with shareholders of Bumi Armada and could take “a substantial stake” in the FPSO player.

Citing sources familiar with the matter, The Edge said it is understood that preliminary negotiations have been going on between MISC and Bumi Armada’s shareholders, but they have not reached any significant level.

Bumi Armada's potential acquisition could give MISC a strong foothold in multiple Asian markets including India where Bumi Armada operates a few vessels for state-owned Oil and Natural Gas Corporation (ONGC), including the one for KG-DWN-98/2, along with SP Energy , one analyst noted

Shares in Bumi Armada rose almost 7% on Tuesday when news broke of a potential deal with MISC and have continued that upward path since.

However, The Edge noted a research report by BIMB Securities Research on MISC, which expressed doubts about a potential stake acquisition in Bumi Armada, citing a lack of economic justification.

BIMB said there were numerous other investment opportunities that could provide greater returns for MISC’s shareholders.

“For example, there is strong demand for FPSO currently amidst the upcycle in offshore development projects. We understand that MISC is evaluating new FPSO project opportunities as the ongoing project in hand (Mero 3) is close to completion.”

Bumi Armada’s largest shareholders include Malaysian-Tamil billionaire tycoon Ananda Krishnan, who has a 34.58% stake.

Several years ago, Ananda Krishnan was believed to be looking to exit the Malaysian FPSO specialist, and one of the parties courting him was Shapoorji Pallonji Mistry of SP Energy, who had served on Bumi Armada’s board, according to The Edge.

This is not the first time that a tie-up has been mooted between MISC and Bumi Armada. The Kuala Lumpur oil and gas scene in late 2015 was rife with talk the two companies were in negotiations and that Petronas subsidiary MISC could take up to a 65% majority stake in Bumi Armada — but no transaction materialised.

The contractor’s currently operated assets comprise three wholly owned FPSOs, four jointly owned FPSOs, a wholly owned liquefied natural gas floating storage unit and two construction vessels.

In comparison, MISC, which also has its own FPSO assets, owns more than 100 vessels.

“In reference to the article in The Edge Malaysia dated 8 July 2024, which speculates on the possibility of MISC undertaking a corporate transaction involving Bumi Armada, the company wishes to clarify that whilst MISC continues to explore growth opportunities, in its ordinary course of business, there is currently no development within any opportunity that would necessitate disclosure as per the Main Market Listing Requirements of Bursa Malaysia Securities,” MISC confirmed in a statement to Bursa Malaysia (the Malaysia stock exchange).