A unit of Fincantieri, the Italian shipbuilder that currently owns about 55.63% of VARD Holdings, intends to make a voluntary conditional cash offer for VARD shares that it does not own with the intention of privatizing the company.

The offer price is S$0.24/share (11.6%, 24.4%, 29.7% over the 1-mth, 3-mth, 6-mth VWAP prices up to 11 Nov 2016), and the offer will be subject to Fincantieri having received valid acceptances which will result in it holding more than 90% of the total number of shares at the close of offer. Fincantieri also reserves the right to reduce this acceptance condition to a lower level which is more than 50% of the total number of shares.

We believe that this move makes sense from the viewpoint of Fincantieri, which would be able to enjoy greater management flexibility, especially since now the cruise ship newbuilding scene is booming and Fincantieri’s yards are highly utilised.

Meanwhile, VARD’s yards’ utilization levels have been affected by the poor offshore oil and gas market.

For shareholders of VARD not prepared to ride the offshore cycle, we recommend them to ACCEPT the offer; prior to this there were three analysts covering the stock with a consensus fair value estimate of S$0.159.

Source: OCBC Research - 14 Nov 2016