Value & opportunities
Published by Sam Cage on 09 February 2018
Concrete progress has been made in separating out the oil and oil-related businesses to focus on container shipping, ports and logistics. The solutions identified for Maersk Oil and Maersk Tankers give the businesses long-term certainty and provide value for A.P. Moller - Maersk.
With the aim of finding viable structural solutions before the end of 2018, the Energy division has during 2017 achieved half of that remit.
Progress is important to bring clarity to the oil and oil-related businesses and with the solutions for Maersk Oil and Maersk Tankers, A.P. Moller - Maersk can now increasingly its focus on becoming an integrated transport and logistics company.
For all the oil and oil-related businesses, the Energy division has been examining solutions including listings, trade sales and merger opportunities. Keeping the businesses in good shape – not least since they are all operating in challenging market conditions – has been the necessary premise for identifying and executing on the structural solutions. Maintaining high performance is a testament to the dedication of those working there.
“We are proud and very satisfied with the speed in which we have found good and solid solutions, and where we safeguard that the capabilities and assets built in Maersk Oil and Maersk Tankers continue to be developed in the future,” says Claus V. Hemmingsen, Vice CEO of A.P. Moller - Maersk and CEO of the Energy division. “I am personally am deeply impressed with the attitude of colleagues in the oil and oil-related businesses undergoing such immense change. They have continued to deliver during these times of change. They are really making the difference.”
The future businesses
A.P. Moller - Maersk has signed an agreement to sell Maersk Oil to oil and gas major Total for USD 7.45 billion in a combined share and debt transaction that is expected to close during the first quarter. It has also sold Maersk Tankers to APMH invest, a subsidiary of A.P. Moller Holding, for USD 1.171 million in an all-cash transaction.
Maersk Oil will become part of the world’s fourth largest oil and gas company and Denmark will become the regional hub for Total’s activities in Denmark, Norway and the Netherlands, ensuring a continued Danish stronghold in the North Sea. Sanctioned projects – including Culzean, Johan Sverdrup and Tyra – will continue to progress under Total.
“There’s a future, not an end to this story and there’s really something to celebrate and be proud of for Maersk Oil. It’s a good, strong and industry focused company that is not only yielding up value for A.P. Moller - Maersk, but also providing new opportunities for our colleagues,” Claus V. Hemmingsen says.
As one of the largest tanker companies, with a leading position in their industry, brand recognition was key in the structural solutions for Maersk Tankers. The tanker company will continue under the Maersk Tankers name and use the A.P. Moller - Maersk seven pointed star logo as part of its brand under the ownership of APMH Invest.
“Maersk Tankers has maintained a good and well run business and its name is an important link to the history and the confidence of customers and partners,” says Claus V. Hemmingsen. “A.P. Moller Holding knows this business and the sale provides a very good opportunity for A.P. Moller Holding, a long-term investor that can further develop the tanker company.”
Maersk Drilling and Maersk Supply Service have and are experiencing some of the most adverse market conditions, although Maersk Drilling has seen a slight pick-up in activity over recent months. While solutions for these companies have not yet been determined, there is no relaxation in the efforts to optimise the businesses.
“Impressively, both have had a number of commercial successes, including a string of new contracts “There have been signs of improved market conditions in the offshore drilling industry and this has, among other elements, raised confidence in finding a structural solution for Maersk Drilling within our announced timing,,” says Claus V. Hemmingsen.
Maersk Drilling and Maersk Supply Service are classified as assets held for sale in the Annual Report for 2017.
What has struck and motivated Claus V. Hemmingsen throughout the process of finding structural solutions has been the commitment and professionalism in the oil and oil-related businesses and in the Energy division, where his small team is dedicated to finding solutions for the businesses. All of them while working in positions that will no longer exist at the end of the process.
“The businesses have performed well in a very challenging market and are maintaining their high safety focus,” he says. “We are very pleased that we have managed so far to find solutions that support a strong presence in Denmark, and I am pleased that employees are getting more certainty about the future.
- Total S.A. has bought Maersk Oil for USD 7.45bn, paid by 97.5m shares in Total S.A. with a value at signing of USD 4.95bn equal to approx. 3.76% of Total S.A. (post issuing shares to A.P. Moller - Maersk)
- In addition to the shares Total S.A. is assuming a short-term debt of USD 2.5bn via debt push down from A.P. Moller - Maersk into Maersk Oil. Total S.A. will pay an interest of 3% p.a. of the enterprise value from 30 June 2017 and until closing of the transaction
- The short-term debt will be repaid to A.P. Moller - Maersk at or shortly after closing of the transaction and the proceeds will be used to reduce debt
- Subject to meeting its investment grade objective, A.P. Moller - Maersk plans to return a material portion of the value of the received Total S.A. shares to shareholders during the course of 2018/19 in the form of extraordinary dividend, share buyback and/or distribution of Total S.A. shares
- APMH Invest A/S, a subsidiary of A.P. Moller Holding A/S, has acquired Maersk Tankers for USD 1.171bn in an all-case transaction.The proceeds from the transaction will be used to reduce debt in A.P. Moller - Maersk.
- The transaction entails a market upside provision regulating total payment should the product tanker market significantly improve with a rebound in vessel values before the end of 2019. The purchase price will be adjusted in two scenarios: if the tanker markets improve based on a fleet value accretion, or if APMH Invest sells on vessels at a higher price than the purchase price and higher than an agreed hurdle rate.
- As the transaction is between related parties, fairness opinions have been obtained from Morgan Stanley & Co. Int. Plc. and DNB Bank ASA. The conclusions from these fairness opinions confirm that the transaction value, including the agreed price adjustment mechanism, is fair from a financial point of view.