Defence and Engineering Group Divests Loss-Making Marine Units
ST Engineering (STE), a leading defence and engineering group, has announced its intention to divest its US marine business for US$15 million. This includes the sale of its subsidiaries, VT Halter Marine and ST Engineering Halter Marine and Offshore (STEHMO), to Bollinger Shipyards Lockport. The deal will be executed on a cash-free, debt-free basis with any necessary post-closing adjustments to working capital.
The transaction is expected to result in a non-cash loss of approximately S$13.3 million. However, STE could receive additional earnout payments of up to US$10.3 million, contingent on Halter Marine securing certain future shipbuilding contracts with appropriate profit margins.
This divestment follows a thorough review of the two US marine subsidiaries, which have collectively incurred a net loss before tax of US$256 million between 2017 and 2021. The annual loss ranged from US$40 million to US$60 million. As a result, STE enlisted Macquarie Capital as its financial adviser to manage the sale process, which attracted interest from strategic investors and private equity funds.
Bollinger Shipyards was ultimately deemed the most suitable buyer, praised for its strong reputation in US Navy and Coast Guard programmes. Despite a history of rivalry—when STE successfully acquired Halter Marine in 2002 after Bollinger’s objections—the companies now find themselves partners in this deal.
STE’s decision to exit the US marine market, while challenging, reflects the difficulties in operating these shipbuilding and repair businesses. Vincent Chong, the group’s president and CEO, stated that the proposed sale represents a positive outcome for STE’s shareholders and stakeholders.
While STE is divesting its US marine assets, it continues to view the US as a critical market, with plans to invest further in its other businesses, including defence, commercial aerospace, and smart mobility. The group also emphasised that its marine business in Singapore remains central to its strategy.
Following the announcement, CGS-CIMB raised its price target for STE’s stock, citing improved earnings forecasts due to the disposal of the underperforming marine units. Despite reducing its marine revenue projections, the firm anticipates a positive impact on STE’s operating margins.
Shares of STE rose by 0.6% to S$3.35 after news of the proposed divestment.
