Merger Mania

1995 was a record year for the financial markets in the US. Almost all of the previous records were broken as stocks climbed to an all time high and bonds had returns that made many investors happy. According to some opinions, this spectacular performance of the stock and bond markets triggered the merger mania that captured top executives in almost every single industry. More than 9,000 mergers took place in 1995, amounting to approximately $450 billion. In industries such as telecommunications, media, financial services and high technology, the leading companies came together to form even bigger organizations. The early 1990′s belief that large organizations are inflexible and therefore cannot compete efficiently in the global arena sounded like a theory from a forgotten era. The question of 1995 was “How big do you have to be to dominate your industry?”

Following the trend, many shipping companies around the world entered into mergers at an unprecedented pace. Although the size of the shipping mergers was not similar to that between Disney and Capital Cities-ABC or Chase and Chemical Bank, the mergers still clearly signaled that consolidation is at the top of a shipping company’s agenda. Continue Reading

Lykes Countdown and Other News

Lykes may not last the first quarter, at least if the current attitude among some of its major lending parties does not soften.  Lykes’ use of Chapter XI to try to keep its newbuilding finance in place at the expense of its other creditors – coming on the heels of several other equally outrageous financial collapses – has driven some of the industry’s more serious players to say enough is enough. Criticism of less than corporately professional shipping practices is on the rise, and Lykes – American, old line as it is – appears unlikely to be spared.

Ole Skaarup, Chairman and founder of Skaarup Shipping Corporation, announced he would step down as CEO of the Skaarup Group of Companies effective December 31, 1995.  Dr. Skaarup guided the company for over forty five years, establishing during that period a reputation for innovative and creative solutions to bulk shipping challenges.  Clients included National Gypsum, US Steel, the oil majors and many other industrial giants.  Frank Parker will succeed Dr. Skaarup as CEO.  John Stocker, former Head of the US Shipbuilder’s Council and currently President of two Skaarup shipbuilding companies, will become a Director in the company.  Dr. Skaarup remains Chairman of the Board. Continue Reading

Limiting the Unknown: The P&I Dilemma

by Bridget Hogan

P&I premiums for shipowners could well top the $2 billion figure for the 1996/97 year now under negotiation as the deadline of February 20 fast approaches.

Shipowners are facing increases similar to those of last year – in the region of 5% to 7%. Some may have to pay 7.5% more; others may find no increase at all.

The individual sums for vessels are to be paid in two or, at most, three installments, depending on the Club’s own policy. The first installment will typically be made up of about two-thirds of the advance call, with the remaining third due in August at the time of the second installment. In addition, at that time, any back calls owing to the club are payable. This makes August, according to one P&I Club executive, “a nasty month” for shipowners. Continue Reading

Last Minute Gains for Shipping Companies

The last two weeks of 1995 held no surprises for the financial markets in the US and around the world. The Dow Jones average fluctuated between a low of 5059.32 on 12/20 and a high of 5117.12 on the last trading day of the year. In the meantime, it had reached an all time high of 5216.47 on December 13. For the whole year, the Dow Jones average rose by 1282.68 points or 33.45%. The Dow Jones 20 Transportation average had an even better performance in 1995. It rose by 525.97 points or 36.15%, mainly driven by the airline companies’ surging stocks. Continue Reading

Hornbeck Offshore

Hornbeck is one of the largest supply vessel operators in the world and will soon be part of the largest after the merger with Tidewater which was announced on December 22 (see article on page X). Its main region of operations is the Gulf of Mexico, and it has recently entered the North Sea market through its 1993 acquisition of Seaboard Offshore Group Limited. In November 1994, Hornbeck acquired Oil & Gas Rental Services, Inc. (13 supply vessels) increasing its presence in the Gulf area as well as the quality of its fleet. The acquired vessels include four 220 ft. vessels and seven 188-192 ft. vessels of high quality that can command premium dayrates. In this report, Hornbeck is considered an autonomous entity.

Hornbeck’s revenues depend directly on the cycles of the offshore oil and gas exploration industry. Lower oil and gas prices that result in decreased activity in the Gulf area adversely affect Hornbeck’s revenues and profitability. However, with most of its operating expenses fixed, Hornbeck realizes increased profitability in periods of increased activity when dayrates and fleet utilization increase. Many industry experts forecast an increased demand for gas from the Gulf area and, therefore, favorable market conditions for Hornbeck. On the other hand, a potential drop in oil and gas prices that would cause a decline in the Gulf area activities would have an adverse impact on Hornbeck’s operational results. Continue Reading

Havtor A/S

Havtor A/S (Havtor) has been one of the most prominent shipping interests. Well managed and well positioned, it is one of the largest companies in the liquid gases transportation sector and it has been one of the most active companies with regard to mergers and acquisitions in the past two years. More recently, as a result of its merger with Bergesen (see article elsewhere in this issue) it has formed one of the biggest shipping companies in the world. Havtor A/S is the result of a merger between A/S Hav, A/A Havtor, B.O. Steen Shipping AS and A/S Havmoy. In 1995, Havtor acquired the gas carrier activities of Kvaerner, Neste OY, International Shipholding Corporation and Partrederiet Nemo, while simultaneously merging with Havtor Management Shipping AS. Because of the consecutive mergers and acquisitions, comparison of results between the first nine months of 1995 and corresponding periods in prior years is not applicable. Therefore, we present separately Havtor’s results for the first nine months of 1995 and for prior years. Regardless of the applicability of comparisons between different periods, a look into Havtor’s financial performance provides a clear picture of Havtor’s evolution until its merger with Bergesen. Continue Reading

Cash Buyers Expect Cheap Ships

Hapag-Lloyd is in the market for 10 containerships – and is “paying cash so expects to get some bargains.”  That’s the New Year message for shipyards from Gunther Casjens, the director who heads up the group’s liner division. In fact, according to chairman Bernd Wrede, H-L will spend DM 3 billion across the group in its five year plan to 2000, averaging DM 600 million expenditure a year.

The group is going ahead with its bold investment program, even though senior management, including Casjens, feels that the market faces worsening over-capacity in 1996 and 1997. Casjens says the liner sector will improve after that, and judging by the age profile of vessels, he expects some of the older ones to be making their way to the scrapyards by the end of the century. “We are building ships exactly in line with our own demand,” he said.  Half of the new capacity will cover replacement of older tonnage and the other half will  cover the market growth H-L expects. Continue Reading

Bergesen D.Y. AS

Bergesen owns one of the largest VLCC/ULCC and LPG fleets in the world. Its tanker fleet tops 6,000,000 dwt and its LPG fleet 1,300,000 cbm. In addition, it has a 65% interest in a dry cargo fleet of more than 1,400,000 dwt. Furthermore, the Bergesen D.Y. Group has real estate and financial investments as well as interests in onshore and offshore industries through its subsidiary Teknisk Bureau in Stavanger.

Recently, Bergesen, in a highly publicized deal, acquired 50.1% of Den Norske Amerikalinje AS (NAL). On top of this, Bergesen acquired approximately 34% of Havtor AS and, on November 20, 1995, the two companies announced that their Boards of Directors have agreed to merge the two companies with Bergesen appearing as the acquiring company. The merger is proposed to take effect on January 1, 1996. According to the agreement, Havtor shareholders will receive 11 Bergesen shares for every 70 Havtor shares. Bergesen will issue an additional 18,937,149 shares with the total number of Bergesen shares at 75,759,661 after the completion of the deal. The companies have yet to decide on management, operation and organization issues. Continue Reading

Storli AS

Storli is one of the four leading chemical tanker operators with an 18% market share, together with Stolt-Nielsen (22%), JO Tankers (10%) and Seachem (8%). Through its wholly owned subsidiary Odfjell Tankers, it operates 45 ships, 27 of which are company owned. In July 1995, it took delivery of its second newbuilding from a series of six from Kvaerner Group, and was expecting a third in October. 

In 1994, Storli reported a net income of NOK 162 million vs. a loss of NOK 31 million in 1993. This reversal of fortune came as revenues increased by 14% while expenses remained stable. Strong demand arose as most of the economies around the world improved compared to the previous year. Freight rates improved by 17% in 1994 and, together with increased volume, boosted Storli’s profitability. Continue Reading

Unctad’s Days Numbered

Shipping at Unctad awaits its fate. Days could be numbered for maritime deliberations at the Geneva-based United Nations Conference on Trade and Development, once the scourge of shipowners and flag administrations.

Remember the UN Liner Code?  Remember attempts to introduce one for the bulk trades?  Discussions on open registries? Square brackets? All those late night plenaries with last minute climb downs?  All those miniatures from hotel fridges being consumed outside closed doors at the Palais des Nations? It’s a bit like trying to explain the Cold War or hot Reaganomics to the kids, eh?

Well, it could all be over. It seems like cutbacks introduced since Unctad XIII in Columbia four years ago have not been enough. And even if John Major, the UK’s Prime Minister, doesn’t get his way after his speech at the 50th anniversary meeting in New York, days could be numbered for many Unctad services. Continue Reading