From a standing start 12 years ago, Bhagwan Marine has built a large business in oil and gas services and has now attracted backing from private equity to support its growth.
From a standing start 12 years ago, Bhagwan Marine has built a large business in oil and gas services and has now attracted backing from private equity to support its growth.
The seeds of Loui Kannikoski’s business success were sown in 1998, when he was asked to take his cray boat up north for a month to relieve another vessel that was being serviced.
There were lots of old cray boats servicing the oil and gas fields back then and Mr Kannikoski soon spotted an opportunity.
“There was a need at the small end of the market for purpose-built vessels,” he said.
His family bought its first oil and gas vessel in 2000, and the business has not stopped growing.
It now has 50 vessels, generates annual turnover of $120 million and Mr Kannikoski has no plans to stop.
However, he realised more than a year ago he needed extra capital.
“We see the future as being highly exciting but there was only so far we could take it ourselves,”’ he told WA Business News.
That’s when he started talking to business acquaintances and professional advisers about the best way to bring in new capital. A stockmarket float was one option, but he knew Bhagwan Marine was not ready to go down that path.
“It was only two years ago that we put on an internal accountant,” he said. Plus, he had seen too many “horror stories” of people going to an IPO too early.
The alternative was private equity.
Mr Kannikoski was introduced to Catalyst Investment Managers 10 months ago and, since then, the two groups have been spending lots of time getting to know each other.
This included Catalyst taking its entire investment committee to Dampier to inspect Bhagwan’s main operational base.
“They had to understand what we wanted to do and feel comfortable with it,” Mr Kannikoski said.
The result is that Catalyst has become an investor in the Geraldton-based business, acquiring a large minority shareholding believed to be about 40 per cent.
That has allowed Bhagwan to pay down its debt and gives it the capacity to acquire more vessels.
Catalyst’s Perth-based executive director, Aaron Hood, said his group was attracted to Bhagwan because of its unique market position.
It is the largest of the local players, with purpose-built vessels that other companies cannot easily replicate, but operates in a niche that does not attract the big international players.
Mr Kannikoski said he also invested more in vessels and in staff training and development and this was reflected in low staff turnover.
He said another indicator of Bhagwan’s success was its ability to pre-qualify to work for oil and gas majors like Chevron and Apache.
The surge in marine construction projects in Western Australia and Queensland provides an immediate growth opportunity for Bhagwan, but the business also sees plenty of long-term opportunities in repair and maintenance work.
“There are lots of revenue streams in this industry that will continue for a long time after the construction phase,” Mr Hood said.
The Kannikoski family, including Loui and his wife, Kerren, who has played a key role running the business, will retain a majority shareholding.
However, the family will cede a majority of board seats to Catalyst.
The company’s board will be chaired by Catalyst representative Anthony Wooles, who is also making an investment in Bhagwan.
Catalyst directors John Storey and Aaron Hood will also join the board, along with Mr Kannikoski and commercial manager Darren Kollin.
In addition, the company will be bolstering its management team with the appointment of a finance director.
Catalyst was advised by KPMG and Clayton Utz in Perth.
