Note 31 - Business Combinations

At the end of May 2016, Siem Offshore Inc. acquired the remaining 50% of the shares in Secunda. Following this transaction, Siem Offshore Inc. owned and controlled 100% of the shares in Secunda.

Details of the purchase consideration, the net assets acquired and bargain gain recognized are as follows:

Purchase consideration for the remaining 50% shares was USD 1.

The assets and liabilities recognized as a result of the acquisition are as follows;

(Amounts in USD 1,000)

Cash

4,599

Accounts receivable

4,750

Other current receivables

977

Vessels and equipment including favorable
time charter contracts

110,849

Other non-current assets

1,194

Accounts payable

-1,649

Other current liabilities

-3,122

Borrowings

-84,480

Other non-current liabilities

-51

Net identifiable assets acquired

33,067

Gross bargain gain recognized

33,067

Business combination was achieved in stages and the following information explains the loss recognized on equity interest held immediately before the acquisition and the net bargain gain recognized:

Loss on equity interest held immediately before the acquisition

-14,755

Gross bargain gain recognized

33,067

Net bargain gain recognized

18,312

From the date of acquisition, revenues of USD 27,5 million and a loss of USD -1,2 million is included in these consolidated financial statements related to the acquisition of Secunda.

Under the assumption that the acquisition had taken place on January 1, 2016, revenue and loss of the combined group would have been USD 480,1 million and USD -155,9 million respectively (unaudited amounts)

A bargain purchase gain was recorded at USD 18.3 million following the acquisition of the remaining 50% shares in Secunda

The Bargain Gain has been tested against fair market value for the previous held 50% shares in Secunda, the fair market value of the individual vessels and the fair market value of the contracts.

Based on such analysis management has concluded to recognize a bargain gain of USD 18.3 million in the income statement

The acquisition of the remaining 50% shares was a consequence of the previous owner’s decision not to contribute to further funding of Secunda following certain circumstances when Secunda took delivery a new PSV in May 2016

Secunda had a contract with a Polish yard for the delivery of a highly specialized newbuilt PSV that was to commence operations for a major oil-company offshore Canada.

As the vessel was delayed from the yard in Poland, the client notified Secunda that it intented to cancel the charter party due to the delayed delivery. Following this information, the financing bank informed Secunda that the financing commitment for the vessel was terminated with immediate effect.

Siem, as the most active owner of Secunda, managed to get a tender for a alternative financing package in place, however at less favorable terms than the original financing. Further, the import duty that would be payable to Canandian customs was no longer considered as being a part of the vessel purchase price, and had to be financed by funds provided by the owners of Secunda.

At this stage, the previous owner declared that he did not accept the increased risk following the delayed delivery of the vessel and that he would not contribute with shareholder’s funding that was a term under the debt agreement.

Further, the previous owner declared that his investment in Secunda was not regarded as part of his core business.

As Siem held a first right of option to acquire the 50 % shares, the previous owner accepted to sell his 50% shares at total CAD 1.

Siem then made additional funds available to sign a new debt financing agreement. The Charter party with the Oil-company was renegotiated and the cancellation notice was withdrawn.

Despite a very short timeline to get a new debt financing in place, to accelerate the delivery of the vessel, to provide extra owner’s funding and to renegotiate the charter party with the client, Siem managed to enable Secunda to take delivery of the vessel and to commence the operation as requested by the client.

From the date of acquisition, revenues of USD 27.1 million and a loss of USD 1.2 million is included in these consolidated financial statements related to the acquisition of Secunda.

Under the assumption that the acquisition had taken place on January 1, 2016, revenue and loss of the combined entity would have been USD 38.2 million and USD 2.4 million respectively (unaudited amounts).

Board Of Directors

Financial Statements

Notes