Note 3 - Acquisition of Swire Pacific Offshore Holdings Ltd

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

(3) ACQUISITION OF SWIRE PACIFIC OFFSHORE HOLDINGS LTD

On April 22, 2022 (Merger Date), we acquired Swire Pacific Offshore Holdings Ltd., a limited company organized under the laws of Bermuda (SPO) which owns 50 offshore support vessels operating primarily in West Africa, Southeast Asia and the Middle East. On the Merger Date, we paid $42.0 million in cash and issued 8,100,000 warrants, each of which is exercisable at $0.001 per share for one share of our common stock. In addition, we paid $19.6 million in cash related to pre-closing working capital adjustments for a total consideration of $223.5 million. The cash portion of the purchase price is subject to customary post-closing adjustment mechanisms related to SPO’s closing date working capital, cash and indebtedness. Revenues and net earnings of SPO from the Merger Date through June 30, 2022 included in our consolidated statements of operations were $43.2 million and $5.3 million, respectively.

Assets acquired and liabilities assumed in the business combination were recorded at their estimated fair values as of the Merger Date under the acquisition method of accounting. The fair value estimates below are subject to adjustment during the measurement period subsequent to the Merger Date, primarily consisting of the final valuation for various working capital items, tax and other liabilities existing on the Merger Date. The estimated fair values of certain assets and liabilities including long-lived assets and contingencies require judgments and assumptions. Adjustments might be made to these estimates during the measurement period and those adjustments could be material. The warrants issued in the acquisition were initially classified as liabilities subject to mark to market fair value adjustments but were reclassified to equity on June 24, 2022. See Note 6 for additional details.

The provisional amounts for assets acquired and liabilities assumed are based on estimates of their fair values as of the Merger Date and were as follows:

(In Thousands)
Assets
Cash	$	33,152
Trade and other receivables		64,621
Marine operating supplies		5,122
Assets held for sale		2,500
Prepaid expenses and other current assets		5,232
Net properties and equipment		179,707
Indemnification assets (A)		32,279
Other assets		1,153
Total assets		323,766
Liabilities
Accounts payable		1,594
Accrued expenses		54,924
Other current liabilities		26,856
Other liabilities		16,886
Total liabilities		100,260
Net assets acquired		223,506

(A) Consists primarily of tax liabilities existing at the Merger Date that are recorded in other current liabilities and other liabilities.

Business combination related costs were expensed as incurred in general and administrative expense and consisted of various advisory, legal, accounting, valuation and other professional fees totaling $7.2 million and $9.4 million for the three and six months ended June 30, 2022, respectively.

Property and equipment acquired in the business combination consisted primarily of offshore support vessels. We recorded property and equipment acquired at estimated fair value of approximately $179.7 million. The fair values of the offshore support vessels were estimated by applying both an income approach, using projected discounted cash flows, and a market approach. We estimate that the remaining useful lives for the vessels acquired fall in the range of one to 16 years, based on an original estimated useful life of 20 years. No goodwill was recognized in connection with this business combination.

The unaudited supplemental pro forma results present consolidated information as if the business combination were completed on January 1, 2021. The pro forma results include, among others, (i) a reduction in depreciation expense for adjustments to property and equipment and (ii) the reversal of any income or expense related to assets retained by the seller, Banyan Overseas Ltd., a limited company organized under the laws of Bermuda. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the business combination.

(In Thousands)
				Period from
	Year ended			January 1, 2022
	December 31, 2021			to June 30, 2022
Revenues	$	578,506		$	336,275
Net loss		(143,509	)		(38,808	)