The merger combines two “highly complementary asset portfolios” with activities across the marine services industry, according to Mermaid.
“Mermaid’s core activities of MMA will remain unchanged,” the company’s directors said in a statement.
“The merged group will have strong growth prospects with sufficient capital to exploit opportunities in a broad range of sectors and geographies,” they said.
“Mermaid proposes, subject to shareholder approval, to change its name to P&O Marine Limited and therefore will be able to leverage off one of the best known brands in the international shipping industry.”
The merged company will have annual revenue of about $200 million. It will operate more than 40 directly owned specialist vessels and manage an additional 100 vessels for third parties, and it will have more than 1300 employees.
Mermaid said about 75% of the merged entity’s revenue would be under medium-to-long term contracts across different market segments and geographies, and it would have substantially reduced gearing.
The new company would also have the support of P&O Maritime Services’ major shareholder, DP World, in growing the company in Australia and internationally in all business sectors.
“The merged company has the potential to become a major international player in marine services,” DP World chief executive Mohammed Sharaf said.
“Whilst the core of the group is currently its Australian operations, we have the opportunity, over time to create a global business leveraging the P&O name and DP World’s global reach to provide quality services to customers around the world.”
The proposed merger will be implemented by Mermaid issuing 221.9 million shares to DP World in return for 100% of the shares in P&OMS, P&O Maritime Services (PNG) and P&O Polar Australia (the P&OMS Group), subject to the approval of Mermaid shareholders.
DP World is currently owner of the three companies and the proposed merger will result in DP World holding about 60.4% of the enlarged fully diluted share capital of Mermaid.
Mermaid will also assume $40 million of net debt, giving an enterprise value for the P&OMS Group of $261.9 million. The merged entity will remain listed in Australia.
“Mermaid Marine Australia’s directors believe the merger terms represent an appropriate control premium to existing Mermaid shareholders reflecting the ‘change of control’ nature of the transaction,” Mermaid told the Australian Stock Exchange.
“Mermaid shareholders will own approximately 39.6% of the merged group and will participate in the significant ongoing benefits that the directors believe will arise [from the merger].”
Mermaid’s directors have recommended unanimously that the company’s shareholders vote in favour of the proposed merger unless an independent expert concludes the transaction is not fair and reasonable or a superior is made.
The proposed merger will also combine the management and board expertise of Mermaid and the P&OMS Group. The chairman of the merged company will be current Mermaid chairman Tony Howarth, and the managing director and chief executive will be current P&OMS managing director Andrew King.
Mermaid managing director and CEO Jeff Weber will remain an executive director and will be chief operating officer of the merged company. The balance of the seven-member board will comprise two further independent directors (one from Mermaid’s existing board and one to be appointed by agreement between the parties) and two non-executive directors appointed by DP World.
