23 July 2014

Ezion - Proposed Disposal of Marine Units at S$55M to AusGroup - July 2014

The Board of Directors (the “Board”) of Ezion Holdings Limited (the “Company” and together with its subsidiaries, the “Group”) wishes to announce that the Company has entered into a sale and purchase agreement dated 22 July 2014 (the “S&P Agreement”) with AusGroup Limited (“AusGroup”), pursuant to which AusGroup shall purchase, and the Company shall sell, the Company’s entire shareholding in Ezion Offshore Logistics Hub Pte Ltd (“EOLH”) and Teras Australia Pty Ltd. (“Teras”, together with EOLH, the “Targets”) (the “Proposed Sale”) for an aggregate consideration of S$55 million.

The aggregate consideration of S$55 million (the “Consideration”) was arrived at on a willing-buyer and wiling-seller basis, after negotiations which were conducted on arm’s length between the parties, and take into account, inter alia, the net tangible assets of the Targets and the fair market value of the Targets of approximately S$55 million set out in the independent valuation report dated 10 July 2014 commissioned by the Company and prepared by Stone Forest Corporate Advisory Pte. Ltd.

The Consideration of S$55 million shall be satisfied in the following manner on completion of
the Proposed Acquisition (“Completion”):

(a) S$14 million in cash; and

(b) 92,155,541 new fully paid ordinary shares in the capital of the Company (“Consideration Shares”) having a total value of S$41 million, issued at a price of S$0.4449 per Consideration Share (the “Issue Price”).

In line with the prospect statement made in 1Q2014 results announcement on 7 May 2014, the Proposed Sale will allow the Company to continue its focus on investments in Service Rigs to meet the strong demand for such Service Rigs.

Furthermore, the business of the Targets and AusGroup are complementary but not in competition due to different services provided to similar clients in the similar geographical area of operations. The Company will own approximately 17.83% of the enlarged share capital of AusGroup upon completion of the Proposed Sale and will enjoy the synergy from the fusion of the two complimentary business.

Source: http://infopub.sgx.com/FileOpen/Ezion_Announcement_23072014.ashx?App=Announcement&FileID=306396

My Opinion

It is definitely a good news to Ezion as it is expected to focus more on service rigs business while transferring the non-core assets to its associate companies. I believe now institutional investors are given more confidence on its efforts to reduce the debt level by transferring the non-core assets as well as to improve its cash position in order to get more new business from service-rigs / lift boat business.

Just not too long ago, Ezion share price dropped to S$1.90 as one of the research houses questioned on the business model of Ezion and the useful life of the service rigs. Let's wait for the latest quarterly report later which I believe is released by next month.

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