Tuesday, September 04, 2007

Ezra – Approval for EOC Listing on Oslo Bourse

On August 31, 2007 (yes, the last day of Ezra’s financial year), Ezra announced that it had obtained in-principle approval from Oslo bourse (in Norway) to list EOC Limited. This is subject to five conditions which must be met:-

1) Requirements of holders of one round lot in EOC shares as stipulated in Section 2.4.2 of the Stock Exchange Listing Rules;
2) At least 25% of the shares to be admitted for listing must be held in the hands of the general public;
3) EOC to publish an approved prospectus;
4) EOC is to ensure that the composition of its Board of Directors is in accordance with the Norwegian Code of Practice for Corporate Governance;
5) EOC is to enter into a listing agreement for primary-listed companies.

EOC has also decided to allow the President of the Oslo Bourse to decide if EOC will be listed on Oslo Axess (something akin to a second board) or the Oslo Main Board. The first day of listing should be no later than October 26, 2007 (by then, Ezra’s FY 2007 should have been released).

This listing is seen as being strategic for Ezra as it allows them to get a foothold in Europe and brings them closer to their markets in South America, the North sea and West Africa. The divestment of 43% of EOC Limited will also allow Ezra to remain “asset-light” while unlocking the value of EOC’s assets through a listing vehicle (listed assets generally enjoy much higher valuations than unlisted assets due to the presence of liquidity). Norway is also one of the leading countries in the oil and gas industry and therefore EOC’s assets will get a much better valuation there as compared to other bourses which may not understand oil and gas assets very well.

The only uncertainties remaining are whether Ezra is going to declare a dividend-in-specie from the listing of EOC as 25% of the listed shares needs to be held by the public (and not institutions). This means that Ezra’s originally intention to derive cash to distribute to shareholders as a special dividend may be altered upon receipt of this new requirement. I believe the Management are still working out the details and will inform shareholders soon on their decision and how the deal will be structured.

Another uncertainty is the eventual valuation which EOC will command. A 10% discount to market price will be given in order to list EOC’s shares on the bourse and the last traded price on the OTC market for EOC was NOK 23.5 (and not NOK 26 as stated in the circular). Upon further clarification from Mr. Tan, he said that the price will be fixed on the day the contract for the listing is signed; and I assume this means that it should be no later than October 26, 2007 as a decision will have to be made by then. The valuation will affect the amount of proceeds that Ezra will obtain (net of professional fees to the listing agent). It remains to be seen what the proceeds will be used for although Kim Eng’s report dated September 3 did mention the possibility of Ezra further expanding their AHTS fleet.

Besides these exciting developments, there is also no update so far on the Vietnamese fabrication yard and how Ezion is supposed to be integrated into Ezra’s supply chain. I would expect an announcement before the end of this year regarding the Vietnamese yard and I believe this might be a further area of earnings and revenue growth for Ezra as we now move into FY 2008.

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