Rem Offshore has agreed to merge with rival Solstad Offshore, marking the first big step towards consolidation in the distressed offshore vessel market.

Following 10 days of heated debate between the two companies and Solstad’s new shareholder Aker, a tie-up is expected to be completed in early December.

Solstad and Rem have agreed to combine through a wholly-owned subsidiary of Solstad, which will be the surviving company.

Lars Peter Solstad, chief executive of Solstad, said: "Reduced spending across the upstream value chain has contributed to the current overcapacity, adversely impacting day rates and utilization.

"The offshore service vessel (OSV) industry's fragmented structure is further compounding these negative effects.

"Solstad and Rem both see the need to create larger entities with financial and operational strength to weather the downturn.

"The combination of Solstad and Rem is one step in the right direction, but there remains a strong rationale for further consolidation."

Remoy guaranteed key role

Rem's chairman Age Remoy admitted to TradeWinds last week that Aker and Solstad's move caught him by surprise and he described it as "hostile" and "disappointing".

But Remoy's demand to carry over his controlling position in Rem into a significant voting interest in Solstad after the merger has been met.

Solstad said in a joint announcement with Rem that it is looking forward to having Remoy as a key industrial shareholder.

Through his principal holding company, Remoy will also nominate a member to the board of directors of Solstad.

Remoy expressed his satisfaction over the companies' agreement to operate their joint platform supply vessel (PSV) fleet from Rem's headquarters at Fosnavag.

He said: "I am satisfied that the merged company will allocate substantial activities to Fosnavag, with potential for substantial increase, which will contribute to securing development possibilities for the region and stable  employment opportunities for our nearly 500 highly qualified employees."

Aker's "sabotage" ends with merger

As TradeWinds has reported, Aker, which only invested in Solstad last month, blocked Rem's restructuring plan in a bondholders' meeting last week.

The Kjel Inge Rokke-led company made it clear that it will do its best to bring consolidation to the sector.

Oyvind Eriksen, president of Aker, said: "The merger is a necessary structural measure in today's OSV market, which will enable the combined company to achieve significant synergies through more efficient operations and a lower cost base."

According to the merger plan announced today, Solstad will create new class B shares which will be exchanged for Rem shares at a ratio of 0.0696.

Age Remoy and his related companies will, however, receive 6m class A shares in Solstad for the first NOK 75m Rem shares subscribed by them in Rem's NOK 150m share issue, which will be carried out as proposed before the merger.

Following the completion of the transaction, the combined company will operate a fleet of 62 vessels.

Arild Myrvoll, chief executive of Rem, said. "From a commercial perspective, the merger will further strengthen these pillars of productivity and profitability, while at the same time improving margins and reducing downtime through inherent cost and operational synergies."

This is the second attempt by Solstad to take over Rem in the last decade.

It previously built a stake of 40% in Rem before launching an official bid which received limited acceptance and was fought back by Rem’s boss Age Remoy and his brother Stig.