Tag Offshore, Ocean Sparkle look at merger

Talks between companies in advanced stage for a $100-million deal.

There is a $100-million marriage brewing on the high seas. Tag Offshore, the Mumbai-based marine support service provider, is understood to have initiated strategic discussions, including a merger option with Hyderabad-based Ocean Sparkle, which is also engaged in providing services such as offshore, drilling, marine construction and port and terminal support.

According to investment bankers close to Tag Offshore, talks are in an advanced stage of exploring a merger, including the option of an acquisition. While the management of Tag Offshore declined to comment on the discussions, officials of Ocean Sparkle could not be reached for their reaction. However, senior officials of Tag Offshore, requesting anonymity, said they were engaged with Ocean Sparkle for a range of business alignment aspects and it might be a little early to predict the outcome.

Tag Offshore, incorporated in 2003, acquired the offshore business of Essar Shipping Ports and Logistics. Over the years, it has scaled up its operations to have a fleet size of 14. The company reported revenues of about Rs 130 crore in 2010-11, catering to the requirements of entities like ONGC, Jawaharlal Nehru Port Trust and Cochin Port Trust.

According to bankers close to Tag Offshore, its gearing is at 1.7 times having raised debt to acquire the fleet, and the gearing will be more stretched if it decides to acquire Ocean Sparkle, which is a bigger player with revenues of around Rs 250 crore.

Ocean Sparkle, backed by private equity funds India Equity Partners and Eredene Capital Plc, provides services such as harbour towage, mooring, pilotage, ship-to-ship transfer of cargo and control tower operations.

Incorporated in 1995, Ocean Sparkle and its joint venture companies have a fleet of 81 vessels operating across 22 locations in India. The company operates a fleet of harbour tugs with presence in most of the leading ports, including JNPT (Mumbai), Mormugao Port (Goa), Pipavav Port and Reliance Port and Terminals Limited (both in Gujarat), Ennore Port (Tamil Nadu) and Cochin Port (Kerala). It has three joint ventures with the Port of Singapore Authority (Marine) in India to provide port operations and marine services, and a joint venture operation in Oman.

Even as these discussions are progressing with Tag Offshore, Ocean Sparkle has approached the International Finance Corporation to raise a debt of $11.5 million for its wholly owned subsidiary Sparkle Port Services.

This subsidiary has been awarded a 17-year contract by Petronet LNG Ltd, to provide services at its upcoming LNG terminal at Kochi. Sparkle Port has a capital expenditure of $31.5 million for the project, primarily for the acquisition of tugboats and marine craft.