CNBC-TV18’s stocks editor, Udayan Mukherjee - It’s a big deal, because Great Offshore, for many years in the offshore business, was in a state of limbo while Aban Offshore ran away to a completely different league particularly with its global acquisition. Great Offshore, because of the strife between the brothers, did not quite get its act together. But now they seem to be moving. The valuation of USD 1.4 billion for this acquisition of SeaDragon Offshore seems a little bit on the stretched side.
But the business is in such a sweet spot right now, offshore rigs, that one can almost see that offshore rig prices will continue to mount from here. People will be surprised at the kind of prices rigs are going to or rig charters are going to be at in one-two years’ time. And that’s probably what the management’s in these companies are thinking that on current reckoning they might appear a bit expensive but they will be more than made up with the kind of future pricing that one may see for rigs.
Therefore this acquisition makes a lot of sense. Instead of USD 1.4 billion had they paid a billion or USD 1.2 billion it would have been more favourable for the market. But even so, this is the kind of stuff, which re-rates stocks and I suspect now even if the market has near-term concerns about the valuation, this will workout like a major trigger for the stock in the medium term and will completely re-rate it, like Aban got re-rated after it made its global acquisition.
So I have no doubt that now Great Offshore will be seen somewhat in at par with Aban Offshore particularly as these rigs come on stream after construction. And one will probably see a serious outperformance from this sector and from the stock going forward. It makes a lot of sense and Great Offshore had to make a global move like this to position themselves for the future.
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