STX OSV slides despite sale of stake at a purportedly higher price than market

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Since 3 months ago, it was reported that STX Group is likely to sell off its 50.75% stake in STX OSV. Some news speculated that the deal would be done in April, while others speculated in May. According to Maeil Business Newspaper 18 May 12, (South Korea main daily business newspaper), STX Group seems to be close to signing a preliminary agreement to sell 50.75% stake in STX OSV to Italian shipbuilding Fincantieri and private equity firm Carlyle group at around $1.60. The newspaper cited that the agreement may be signed as early as the following week. However, nothing was announced during the period.
Next came another announcement on 28 May on Hellenic Shipping News which quoted a source from Korea JoongAng Daily. In the report, it mentioned that STX Group is planning to sell the STX OSV which they value at 2 trillion Won for 1 trillion Won. Based on personal calculation, this amounted to around $1.76-1.83 per share. STX Group added that one Italian shipper and one Singapore shipper have expressed interest.
If this were true, Singapore’s takeover guidelines require any buyer of more than 30% of a publicly traded company to make an offer for the rest of the stock. Citigroup in a May report speculated that the offer price may be higher 10-20% if the parties want to take STX OSV private.
Notwithstanding the potential takeover, STX OSV has tumbled 23% from $1.82 on 22 Mar to close at $1.395 on 1 Jun vis-a-vis STI’s 8.2% decline over the same period. It may seem like market does not expect the deal to go through that soon or they may expect a lower price tag. Given STX Group’s existing finances, it should be in their interest to divest its stake in OSV in the near term so as to bolster their finances.

For readers who are not familiar with STX OSV, STX OSV has a niche in high end OSV with a market share of 20%-30% mkt share. Market cap is S$1.7b. Ave analyst target price is $1.87. Please refer to Annexes A & B below for more information on STX OSV.

As usual, the devil is in the details. Readers who are interested can drop me an email at crclk@yahoo.com.sg and i can send you some useful research reports on STX OSV) 
*This was sent out to my clients last Sunday afternoon.
Annex A: Description of STX OSV
Source: Bloomberg

Annex B: Analyst target prices
Source: Bloomberg

Disclaimer

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