Shares of Malaysia's SapuraCrest Petroleum Bhd. and Kencana Petroleum Bhd. climbed Tuesday, bolstered by news they would be merged in an 11.85 billion ringgit ($3.9 billion) deal to create one of the world's largest oil and gas service providers.
Shares of SapuraCrest rose 1.1 percent to 4.54 ringgit ($1.51) by midday and Kencana gained 4.3 percent to 2.92 ringgit (98 cents). SapuraCrest operates drilling rigs, installs pipelines, and develops oil and gas fields while Kencana provides engineering and fabrication services.
The two companies announced late Monday they received offers from Integral Key Sdn. Bhd. to takeover their businesses via a cash and share swap.
The merger _ the largest in the country this year _ was planned by Malaysia's top two investment banks, Maybank and CIMB, and has the support of key shareholders in the two companies. Integral is a special purpose vehicle set up by Maybank.
Under the deal, SapuraCrest and Kencana will have equal share in Integral.
The offer valued SapuraCrest at 4.60 ringgit ($1.53) a share and Kencana at 3 ringgit ($1) a share.
Maybank called the deal a "merger of equals" that will create financial muscle to vie for larger international projects amid anticipation of an increase in upstream investment in oil and gas, driven by high energy prices and growing demand.
The new entity is expected to have a market capitalization of nearly 11 billion ringgit ($3.6 billion) as well as some 6 billion ringgit ($2 billion) in assets, allowing it compete with global rivals such as Italy's Saipem S.p.A., France's Technip SA and Houston-headquartered McDermott International Inc., Maybank said.
"The merged entity will be in a strong position to undertake larger and more complex projects, thus significantly improving business prospects," Integral said in its letter of offer to both companies.
Once the deal is completed in eight months, the two companies will be removed from Malaysia's stock exchange and the merged entity listed under a new name, Maybank said.
The Integral offer expires Aug. 15. Once it is accepted by the two companies, Maybank said a merger committee would be established headed by the chiefs of both firms.