Copenhagen-listed AP Møller - Mærsk A/S is pushing ahead with plans to create an integrated transport & logistics company. It has agreed to sell Maersk Oil for US$7.45bn. The buyer French independent oil company Total which is using acquisition as a strategic tool.
Total will settle using a combination of its own shares (representing 3.76% of its shares) valued at $4.95bn and cash ($2.5bn). Total will assume $2.5bn of short-term debt pushed down into Maersk Oil and decommissioning obligations which currently total $2.9bn.
The purchase is expected to complete in the first quarter of 2018. Total will pay interest on the $7.45bn at an annual rate of 3% for the period between 30 June and the day of completion. The effective date of the transaction has been set as 1 July 2017.
Expected close first quarter 2018
The agreement is subject to regulatory approval from relevant authorities, including the Danish Minister of Energy, Utilities and Climate and relevant competition authorities. Closing is expected to take place during the first quarter of 2018.
A.P. Møller - Mærsk will extract $2.5bn cash from the transaction, said CEO Søren Skou in an analyst call this morning. He described this as an attractive, full price for a business which will no longer be included in forward guidance pronouncements from the company.
Maersk Oil is the first of the four energy companies of A.P. Moller - Maersk for which a future structural solution has now been identified. The solutions for Maersk Drilling, Maersk Supply Service and Maersk Tankers remain to be defined before the end of 2018.
All options considered
Management considered all options including an initial public offering but believes this sale represents the best option for reasons of speed and risk. It will contribute to a strong parent company capital structure. But it will not be overcapitalised.
“We will use the proceeds to reduce debt and plan to return a material proportion to our shareholders in 2018-2019 in a way yet to be decided.” He said this could take the form of an extraordinary dividend, a share buyback or distribution of the Total shares themselves.
The holding makes AP Møller - Mærsk the third-largest shareholder in Total. It has been offered a seat on the Total board but a decision has not yet been made on whether to accept that offer. There is no lock-up clause relating to the sale of the Total shares.
Material step forward
Søren Skou says he believes his company has taken a material step forward in its transformation by agreeing the second transaction in the strategy. The first was the agreement struck with Germany's Oetker Group for Maersk Line to acquire Hamburg Süd.
That deal was announced on 22 December last year. Hamburg Süd is described as the world’s seventh-largest container shipping line and a leader in North–South trades.
Denmark will become the regional hub for all Total’s operations in Denmark, Norway and the Netherlands, based on Maersk Oil’s capabilities and strong position in the North Sea region.
The view from Total
For his part, Patrick Pouyanne, Total chairman and CEO, said the transaction delivers an exceptional opportunity for Total. He says Total is acquiring a company with high quality assets which fit well with many of its core regions. He too describes the price as attractive.