TIdewater to acquire 22-PSV Wilson Sons Ultratug (WSUT) fleet

Written by Nick Blenkey

Tidewater president & CEO Quintin Kneen: “ “WSUT presents a unique opportunity to enter Brazil in scale with a fleet that is almost 90% Brazilian-built.”

In a move that significantly expands its presence in the Brazilian market, Houston-headquartered Tidewater Inc. [NYSE: TDW] has entered into a definitive agreement to acquire all of the outstanding shares of Wilson Sons Ultratug Participações S.A. and its affiliate Atlantic Offshore Services S.A (WSUT).

“The agreement to acquire WSUT marks yet another important milestone in the continued evolution of Tidewater,” said Quintin Kneen, Tidewater’s president and CEO. “The Brazilian offshore vessel market is one of the largest and most compelling in the world and the addition of WSUT to the Tidewater fleet will enhance our presence in the country. WSUT has an excellent reputation as both a shipowner and ship operator, with a fleet that is among the most impressive worldwide today. As of today, 21 of WSUT’s 22 vessels are active and working in Brazil, allowing Tidewater to commercialize this new asset base.

According to Tidewater, the deal has an enterprise value of approximately $500 million, including the assumption of WSUT’s existing $261 million debt.

WSUT’s fleet consists of 22 platform supply vessels (19 of them built in Brazil) and the deal not only expands Tidewater’s current fleet of six vessels in Brazil to a total of 28 but establishes Tidewater as one of the main providers of Brazilian-built PSVs.

Brazilian-built vessels receive priority to operate in Brazil and Tidewater notes that
Brazilian-built fleet provides Brazilian Special Registry (REB) tonnage rights, enabling it to import international-flagged vessels into Brazil under the REB.

“Under local laws, owners of Brazilian built tonnage are afforded a disproportionate advantage over similar foreign vessels,” Kneen told analysts in a conference call. “And furthermore, they also bring the ability to import additional foreign flag vessels and temporarily place a Brazilian flag on those vessels. Brazilian flag vessels receive priority to operate in Brazil and are protected in the commercial tendering process. This REB capacity afforded by the Wilson’s fleet allows us to evaluate the future importation of international flag vessels into the Brazilian market as market demand continues to grow over the time for offshore vessels.”

“As we’ve surveyed the world and evaluated different regions, Brazil stands out as perhaps the most attractive to Tidewater,” said Kneen. “The scale of the offshore industry in Brazil, and in particular the offshore vessel industry, is one of the best in the world and we believe the long-term fundamentals for this market are highly favorable. WSUT presents a unique opportunity to enter Brazil in scale with a fleet that is almost 90% Brazilian-built. This provides Tidewater two distinct benefits: first, the attractiveness of these vessels in local commercial tendering processes and, second, the opportunity to utilize the REB capacity afforded by WSUT’s fleet with Tidewater’s international tonnage to pursue opportunities in Brazil and enjoy the same status as a Brazilian-built vessel. Considering the long-term supply and demand for offshore vessels in Brazil, as well as the potential to introduce international tonnage, this transaction provides Tidewater with a compelling opportunity to capitalize on these dynamics.

“Assuming the transaction closes at the end of the second quarter, we expect the WSUT business to generate approximately $220 million of revenue and generate a gross margin of approximately 58% over the first twelve months. In addition, we would expect to incur approximately $14 million of annual G&A expense.”