Thursday, March 18, 2010

Wah Seong bids for Italian firm Socotherm

Wah Seong Corp Bhd (5142) said it has made a bid to buy troubled Italian pipe-coating company, Socotherm SpA, to expand into the lucrative South American market. “We made a proposal about three weeks ago and we should know the result by the end of April,” its deputy managing director Giancarlo Maccagno told pressmen in Kuala Lumpur yesterday.

He declined to disclose the offer price but said it will be funded internally as the company has RM400 million in cash reserves. “We are confident (of our proposal). We believe, we will be the best acquirer for this group.

They are a pipe-coating group that we know well and in a business that we know well.
The synergistic value will be tremendous,” he said. If it succeeds, Wah Seong will become the world’s second-largest pipe-coating company, after US firm Bredero Shaw. However, Wah Seong’s presence will be bigger than its rival.

Maccagno believes that Socotherm’s revenue could return to their previous heights of between ?250 million to ?300 million in two to three years from under ?130 million (?1 = RM4.55) presently. “Potentially, Socotherm can add RM1 billion to our top line in our core business,” he said.

About US$170 billion (RM561 billion) is expected to be spent on deepwater exploration and production in the next five years, of which 75 per cent will be invested in West Africa, Brazil and the Gulf of Mexico, Maccagno said.
Alternatively, Wah Seong is also in talks with several US-based oil and gas companies to market its deepwater pipe-coating technology in that region.

“We are keeping all our options open. If we are successful then this will put us in a very good position in a very niche and lucrative market,” he added.
Meanwhile, Wah Seong’s managing director and group chief executive officer Chan Cheu Leong said the company is actively evaluating takeover targets to enhance its core business.

The plan is to grow the group’s market value to RM3 billion from RM1.8 billion now, through acquisitions.
Wah Seong is also in talks with the Orleans group of West Africa to buy a stake in the latter’s pipe-coating business in Nigeria. Wah Seong has an order book of RM1.4 billion as at February with some 60 per cent related to its pipe-coating business.

It is bidding for projects worth about RM5.3 billion, which will include major pipe-coating projects in Malaysia, Thailand, Vietnam, China and Australia.

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