Consolidation is king: Tidewater and Swire Pacific Offshore merger

Out with the old, in with the new

Since around 2018, Tidewater has been aggressively selling its non-core tonnage to modernise its fleet. Based on VesselsValue transactional data, Tidewater has sold around 60 vessels (mix of PSVs, AHT/AHTS, FSV) for further trading and around 70 vessels for demolition. This has allowed it to accumulate an estimated US$140M war chest (estimated US$100M for all secondhand sales from 2018 and estimated around US$40M for all demolition sales from 2018). The acquisition of SPO fills the void created by reducing its overall fleet number, and having cash coming in over the last few years always helps.

When the going gets tough, the tough buy their competitors

It is no secret SPO has not had the easiest of downturns and the company has been suffering for many years, with mounting operating losses and burning through cash (at a substantially higher rate than most big offshore players in the market). Growing write offs, the closing down of the Swire Subsea division, and the most surprising, declaring very expensive options of PSVs in the middle of the downturn. However, for a buyer like Tidewater, this presents its own set of opportunities to grab a bargain (or at least a more sensible asking price). The saying ‘one man’s misery is another man’s fortune’ springs to mind, and a knock-on effect of this is stopping your competitors buying SPO or their assets. Controlling the market is critical to remain the top player.

Jumping back into the large anchor handling market

Tidewater has a small exposure to the large AHTS market, with five vessels between 13,000 bhp and 16,000 bhp, the majority of which are working in West Africa. The purchase of SPO will give them access to Swire’s well-respected D class of very large anchor handlers, modern, young, and high bollard pull. Again, the large AHTS market has recently witnessed a sharp tightening, and there are limited sale and purchase candidates. On the chartering side, large AHTS rates are firming, and they are in high demand from both the renewables and oil and gas sector.

With chatter in the offshore market of a recovery in our midst, this transaction primes Tidewater to take full advantage of any changing market conditions and set itself apart from its competitors. It will be interesting to see how other large OSV owners react to this news and what strategies they put in place to compete with the new Tidewater/SPO fleet in the long term.

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