It is one of the most deeply irritating songs in human history, one that has over 820 million views on YouTube and, like influenza and the sickly Cadbury’s cream egg in the UK, appears as a seasonal scourge every year without fail.
Of course, I refer to Mariah Carey’s festive brain worm “All I Want for Christmas,” which is already ringing out across shopping malls and on radio stations all around the world, and will not be silenced for at least another six weeks, except in Taleban-ruled Afghanistan where pop music, Christmas as a whole, and scantily clad singers in excessively short, red Santa robes are all illegal. Even the cruellest and most barbaric tyrannies have some upside, clearly.
Ms Carey is not the only one with a wish list for the festive season. Tidewater boss Quintin Kneen is also on the hunt for a choice Christmas gift, it seems.
Whereas Mariah emphasises that she won't ask for much this Christmas, and she won’t even wish for snow, because she is just gonna keep on waiting underneath the mistletoe, Mr Kneen is apparently seeking a corporate acquisition with a price tag of around US$500 million. Rather than waiting under the mistletoe, he appears to be building a war chest of cash, and performing due diligence and negotiations with his target.
We don’t have access to the material information on which company Tidewater is trying to buy, let alone insight into whether the transaction will ultimately succeed, but the evidence is there that something is happening.
And we do know that Tidewater is a company that is terrible at keeping secrets and that the details of past transactions have been leaked all over the place for weeks before they happened. This time around, Tidewater has even given some pretty big hints to the market that the company is in the process of preparing an offer to buy a competitor.
Tidewater announced its third quarter results on November 10, and they were pretty “meh.”
The revenue from vessels was flat from the same quarter a year ago, and from the preceding quarter this year from April to June, at US$338.5 million. Operating costs were US$8 million higher in total that the year ago quarter and US$4 million from the preceding quarter, mostly on account of an unspecified US$7 million increase in quarterly, “general and administrative expenses,” to a record US$35 million.
This could just mean that the management paid themselves a big bonus for reducing crew expenses on the ships by US$2 million the quarter (see our budget bingo here, a game Tidewater managers must play harder every year, or face their own redundancy, Squid Game style).
Stranger things have been known in Tidewater, a company where the leadership is never knowingly undersold. But most likely it means that the company has been incurring extensive professional fees for due diligence, advisory and legal costs ahead of a bid.
The quarterly results acted as a powerful reminder why Tidewater needs to make another transformative transaction following its acquisition of 50 vessels in the Swire Pacific Offshore fleet in early 2022, and 37 platform supply vessels (PSVs) from Solstad in 2023.
Now, the company has run out of growth in a flat market. 2025 revenues and profits will be lower than for 2024, Tidewater now forecasts.
This is exactly what we warned would happen a year ago.
As the drillers warned in their results, deepwater drilling activity, the bread and butter business for the 139 PSVs in the Tidewater fleet, is probably not going to pick up until the middle of 2026, and the North Sea is currently in a miserable place, especially for PSVs, as we have covered last week.
Tidewater has 49 PSVs working in the North Sea and the Mediterranean, its largest market for that category of vessel, more than it has in the Americas and Asia-Pacific combined (34 PSVs in total). Interestingly, the biggest hit came not from Europe and the Mediterranean, which, like Asia-Pacific, was largely flat as a region in terms of both revenue and vessel operating profits.
The big hit in the last quarter was in West Africa, where Tidewater’s revenues fell 13 per cent and vessel operating profits tumbled over 40 per cent from US$43.5 million to US$24.4 million. With Astro Offshore entering the African market aggressively, Britoil also expanding its fleet in the region, and even three Edison Chouest vessels now supporting a Shell deepwater rig off Sao Tome, Tidewater is facing stiffer competition there than before.
Make no mistake, West Africa was still Tidewater’s most profitable region and is home to the second largest vessel count for the company, with 45 ships working there, but the Americas came close in terms of profits, and almost doubled its vessel operating profit to US$24.7 million, a stellar performance.
The Middle East also finally made a more meaningful contribution in the third quarter at long last, with a contribution of US$5 million from the 42 Tidewater vessels working there. Maybe it is finally being unshackled from the drainpipe in the basement by its cruel clients (an analogy we used here in November 2023 to describe the profitability issues of the Arabian Gulf). However, Seacor reported a loss for its vessel in the region, so maybe not.
These vessel operating profit metrics exclude interest, G&A costs and depreciation, so when these are accounted for, the Middle East was probably still loss making, but at least it is moving forward now.
Tidewater actually made a headline loss of US$800,000 for the quarter, down from a profit of US$46 million in the same quarter in 2024. This is the first loss the company has reported since the first half of 2022.
The current loss was largely because Tidewater had to pay a penalty of US$27 million to its banks for the early repayment of its loans when it refinanced earlier this year, not a bad thing in the medium term, but a nasty hit in the short term, and it faced US$9 million higher tax bill for the current year third quarter.
But it wasn’t just the increased G&A costs that flagged to analysts that the company is again on the prowl, Pac-Man style. Indeed, the stock market didn’t care about the loss, as Tidewater is still generating handy quantities of cash from operations – US$72 million for the quarter, slightly down on the June quarter, but much higher than the quarter a year ago.
Tidewater’s shares rose to close at US$58 on Friday as analysts started to look at all the synergies the company could make by buying a competitor and firing all the management and replacing crew with cheaper alternatives, as has happened across every company Tidewater has acquired.
Investors know Tidewater is planning to make an acquisition because in its call with analysts on November 11, there was even a reference to, "material information that cannot be discussed further," by management (very Voldemort of Quintin Kneen), and the biggest flag for a purchase is the fact that the company has built up US$425 million of cash on its balance sheet, up over US$100 million since the end of last year. It doesn’t need this cash unless it plans to make a large investment.
Most obvious of all, despite having a mandate to make US$500 million of share buybacks, Tidewater has made none this year. Remember, this is a company that loves to make share buybacks, even buying shares in the US$80s and US$90s last year when the stock was significantly more expensive that it is today.
Why? Because share buybacks drive up earnings per share and drive up management bonuses as a result. So, if Tidewater is not buying back its shares when it has a mandate to do so, is building up hundreds of millions of cash on its balance sheet that earns negligible interest, and has various material items it cannot discuss, there is definitely something afoot in the acquisition game.
Tidewater wants a present under the tree, but which company is on Santa’s list?
There are three clear options in the Americas, a region where Tidewater has only 34 vessels, spread across the crucial deepwater markets of the USA, Brazil and Guyana, as well as the dog of the market which is Mexico.
Recall that the region is becoming very profitable for Tidewater and that both Hornbeck and Harvey Gulf are still in the process of finding a way forward after restructurings. Hornbeck was expected to have an IPO at the end of last year, but nothing more has been heard on that front.
Our favourite value investing analyst on Twitter, @100xCompounding, stated the following in their weekly newsletter:
“Hornbeck to us makes the most sense as they can acquire those vessels for an implied price of US$15 million a vessel, which is US$0.37 on the dollar for a high quality fleet that gives Tidewater more market share in the Americas, which has been a goal of management for the last few years.”
Hornbeck has a fleet of 62 vessels, so the “Twitter estimate” of US$15 million per vessel would value Hornbeck at US$930 million. Harvey Gulf has 28 ships, so we assume Tidewater could buy it with cash on hand.
Harvey Gulf recently sold its five subsea vessels to Otto Candies to become a pureplay PSV operator, which puts it in the sweet spot operationally for Tidewater. Tidewater is a company that has tried to operate complex subsea vessels in the past and decided that its low-cost approach is probably not well-suited to the more complicated and higher value ships with large subsea cranes and remotely operated vehicles.
So, a PSV-only operator is a good fit.
The third option would be Seacor Marine Holdings, which has a market capitalisation of just US$200 million, so even assuming a 50 per cent premium on the undisturbed stock price, that would mean Tidewater could acquire the company with cash in hand, although Seacor also had around US$311 million of long-term debt on September 30.
Seacor operates a fleet of 21 fast supply vessels, 19 PSVs, and five jackup vessels. It reported a US$9 million profit for the third quarter, but this was only because of a US$30 million one-off gain on the sale of two other jackups at the end of September.
In the 1990s and 2000s, Seacor was a serial acquirer of other companies; now it looks vulnerable to acquisition itself, having survived the crisis without ever going bankrupt, but having sold all its anchor handlers and several of its PSVs and fast supply vessels.
With just 45 vessels and a small market capitalisation, Seacor has fallen out of the top ten of global owners. It also has two newbuilding high-specification PSVs on order in China with battery hybrid diesel-electric propulsion that require US$54 million of additional funding, by loans or equity.
All three potential targets operate Jones Act tonnage in American waters, so only an American bidder with American ownership and management can acquire them.
Anti-trust is unlikely to be an issue, not only because President Trump has indicated a more laissez faire approach to enforcing anti-trust rules, but also because Tidewater is only a minor player in US waters at the moment, dwarfed by Edison Chouest.
Two other wildcard options exist. Tidewater could buy the twenty or so in service Bourbon assets in the forthcoming auctions by ICBC, and it would not require any monopoly and mergers approvals for an asset purchase of Bourbon ships in an auction, but this seems unlikely. Tidewater seems to have shown no interest in the ICBC process so far.
It could also acquire Brazilian PSV owners Wilson Sons Ultratug Offshore and its fleet of 23 PSVs, which is known to be for sale after Mediterranean Shipping Company (MSC) acquired the 50 per cent owner of the joint venture. MSC paid a total value of approximately US$1.35 billion for the whole Wilson Sons terminal and tug businesses in Brazil as well as 50 per cent of the PSV business.
Tidewater looked at CBO, another Brazilian owner, in the past and could not agree on a price. It could buy half of the joint venture from MSC or the whole company if co-owner Ultratug was also amenable to sell. Maybe.
There are also smaller options. Canada’s Horizon Offshore is rumoured to be for sale with one huge anchor handler, a PSV, and a tug joint venture. Several Middle Eastern players are being touted around, as usual. Maybe we missed something big.
Our view is that Tidewater will acquire in the United States if it acquires at all. We don’t know if Mr Kneen made a list and sent it to the North Pole for Saint Nick, but we do know that he is hunting for a target company and that Tidewater as the ability to execute.
Ms Carey says she doesn't need to hang her stocking, there upon the fireplace (ah), and Santa Claus won't make her happy with a toy on Christmas Day. I doubt Mr Kneen will be happy, either, until he has invested his US$425 million of cash in another game-changing acquisition.
Whatever the outcome in the short term, Tidewater is a force of nature in the offshore support vessel industry. It has a formidable balance sheet, the largest fleet of high-specification vessels, prodigious quantities of cash, and a reputation for ruthlessness.
Whilst we wait to hear those magic reindeer click and a press release to confirm the acquisition, perhaps the song for the moment should be The Bee Gees’ “You Win Again.”
In the last four years, Tidewater has been the biggest winner in the offshore industry, and it will likely win again this time around.
Background Reading
Tidewater’s transparency is excellent and its investor presentation updated for this month is worth a read here. Even the nonsensical slide on newbuild capital costs has been flagged to say that the US$65 million cost of a newbuild large PSV with 900 square metres of clear deck is only for a European-built vessel (hint: nobody is building PSVs in Europe any more).
We understand that a Middle Eastern buyer is looking at purchasing several Chinese-built vessels with 800 square metres of clear deck for US$32 million apiece.